Stock Analysis

Investors Will Want Concordia Maritime's (STO:CCOR B) Growth In ROCE To Persist

OM:CCOR B
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To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Concordia Maritime (STO:CCOR B) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Concordia Maritime is:

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

0.057 = kr50m ÷ (kr1.0b - kr163m) (Based on the trailing twelve months to March 2023).

Therefore, Concordia Maritime has an ROCE of 5.7%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 15%.

See our latest analysis for Concordia Maritime

roce
OM:CCOR B Return on Capital Employed August 8th 2023

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

So How Is Concordia Maritime's ROCE Trending?

We're delighted to see that Concordia Maritime is reaping rewards from its investments and has now broken into profitability. While the business is profitable now, it used to be incurring losses on invested capital five years ago. 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 67%. This could potentially mean that the company is selling some of its assets.

What We Can Learn From Concordia Maritime's ROCE

From what we've seen above, Concordia Maritime has managed to increase it's returns on capital all the while reducing it's capital base. And since the stock has fallen 41% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you want to continue researching Concordia Maritime, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Concordia Maritime 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.

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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.