Seatrium (SGX:5E2) Might Have The Makings Of A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. 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 Seatrium's (SGX:5E2) returns on capital, so let's have a look.

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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 Seatrium, this is the formula:

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

0.037 = S$358m ÷ (S$17b - S$7.9b) (Based on the trailing twelve months to June 2025).

Thus, Seatrium has an ROCE of 3.7%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 5.3%.

See our latest analysis for Seatrium

In the above chart we have measured Seatrium's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Seatrium .

The Trend Of ROCE

The fact that Seatrium is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 3.7% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Seatrium is utilizing 68% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Another thing to note, Seatrium has a high ratio of current liabilities to total assets of 45%. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line

Long story short, we're delighted to see that Seatrium's reinvestment activities have paid off and the company is now profitable. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

While Seatrium looks impressive, no company is worth an infinite price. The intrinsic value infographic for 5E2 helps visualize whether it is currently trading for a fair price.

While Seatrium 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.