We Like These Underlying Return On Capital Trends At COSCO SHIPPING International (Singapore) (SGX:F83)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at COSCO SHIPPING International (Singapore) (SGX:F83) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on COSCO SHIPPING International (Singapore) is:

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

0.015 = S$12m ÷ (S$926m - S$72m) (Based on the trailing twelve months to December 2022).

So, COSCO SHIPPING International (Singapore) has an ROCE of 1.5%. Ultimately, that's a low return and it under-performs the Logistics industry average of 5.1%.

Check out our latest analysis for COSCO SHIPPING International (Singapore)

Historical performance is a great place to start when researching a stock so above you can see the gauge for COSCO SHIPPING International (Singapore)'s ROCE against it's prior returns. If you'd like to look at how COSCO SHIPPING International (Singapore) has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is COSCO SHIPPING International (Singapore)'s ROCE Trending?

The fact that COSCO SHIPPING International (Singapore) is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 1.5% on its capital. In addition to that, COSCO SHIPPING International (Singapore) is employing 65% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Key Takeaway

Overall, COSCO SHIPPING International (Singapore) gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Given the stock has declined 60% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

COSCO SHIPPING International (Singapore) does have some risks though, and we've spotted 1 warning sign for COSCO SHIPPING International (Singapore) that you might be interested in.

While COSCO SHIPPING International (Singapore) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.