Stock Analysis

Will Singapore Shipping (SGX:S19) Multiply In Value Going Forward?

SGX:S19
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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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Singapore Shipping (SGX:S19) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What is it?

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. To calculate this metric for Singapore Shipping, this is the formula:

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

0.074 = US$12m ÷ (US$174m - US$15m) (Based on the trailing twelve months to September 2020).

Thus, Singapore Shipping has an ROCE of 7.4%. On its own that's a low return, but compared to the average of 4.5% generated by the Shipping industry, it's much better.

See our latest analysis for Singapore Shipping

roce
SGX:S19 Return on Capital Employed March 8th 2021

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 want to delve into the historical earnings, revenue and cash flow of Singapore Shipping, check out these free graphs here.

How Are Returns Trending?

Things have been pretty stable at Singapore Shipping, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Singapore Shipping doesn't end up being a multi-bagger in a few years time.

The Bottom Line

In summary, Singapore Shipping isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And with the stock having returned a mere 1.1% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

On a final note, we've found 2 warning signs for Singapore Shipping that we think you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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This article by Simply Wall St is general in nature. 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.
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