Returns On Capital Are Showing Encouraging Signs At Samudera Shipping Line (SGX:S56)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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 Samudera Shipping Line (SGX:S56) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

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 Samudera Shipping Line is:

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

0.096 = US$79m ÷ (US$958m - US$131m) (Based on the trailing twelve months to December 2024).

Therefore, Samudera Shipping Line has an ROCE of 9.6%. On its own, that's a low figure but it's around the 8.4% average generated by the Shipping industry.

See our latest analysis for Samudera Shipping Line

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

What Does the ROCE Trend For Samudera Shipping Line Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 9.6%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 262%. So we're very much inspired by what we're seeing at Samudera Shipping Line thanks to its ability to profitably reinvest capital.

Our Take On Samudera Shipping Line's ROCE

All in all, it's terrific to see that Samudera Shipping Line is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 1,121% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Samudera Shipping Line can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Samudera Shipping Line, we've discovered 1 warning sign that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.