OT Logistics (WSE:OTS) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at OT Logistics (WSE:OTS) so let's look a bit deeper.

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 OT Logistics, this is the formula:

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

0.022 = zł12m ÷ (zł639m - zł92m) (Based on the trailing twelve months to September 2024).

Thus, OT Logistics has an ROCE of 2.2%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 9.7%.

View our latest analysis for OT Logistics

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how OT Logistics has performed in the past in other metrics, you can view this free graph of OT Logistics' past earnings, revenue and cash flow.

So How Is OT Logistics' ROCE Trending?

Like most people, we're pleased that OT Logistics is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 2.2% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 58%. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 14%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Key Takeaway

In a nutshell, we're pleased to see that OT Logistics has been able to generate higher returns from less capital. Since the stock has returned a staggering 335% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

OT Logistics does have some risks, we noticed 5 warning signs (and 1 which can't be ignored) we think you should know about.

While OT Logistics may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.