Marsden Maritime Holdings (NZSE:MMH) Is Looking To Continue Growing Its Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Marsden Maritime Holdings' (NZSE:MMH) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Marsden Maritime Holdings, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.0092 = NZ$1.8m ÷ (NZ$194m - NZ$1.6m) (Based on the trailing twelve months to June 2024).

So, Marsden Maritime Holdings has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Infrastructure industry average of 6.0%.

Check out our latest analysis for Marsden Maritime Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Marsden Maritime Holdings' ROCE against it's prior returns. If you're interested in investigating Marsden Maritime Holdings' past further, check out this free graph covering Marsden Maritime Holdings' past earnings, revenue and cash flow.

So How Is Marsden Maritime Holdings' ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 0.9%. Basically the business is earning more per dollar of capital invested and in addition to that, 27% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Marsden Maritime Holdings' ROCE

All in all, it's terrific to see that Marsden Maritime Holdings is reaping the rewards from prior investments and is growing its capital base. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One more thing: We've identified 5 warning signs with Marsden Maritime Holdings (at least 2 which are concerning) , and understanding these would certainly be useful.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.