There's Been No Shortage Of Growth Recently For Evergreen Marine Corporation (Taiwan)'s (TWSE:2603) Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Evergreen Marine Corporation (Taiwan) (TWSE:2603) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Evergreen Marine Corporation (Taiwan):

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

0.17 = NT$127b ÷ (NT$861b - NT$138b) (Based on the trailing twelve months to September 2024).

So, Evergreen Marine Corporation (Taiwan) has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Shipping industry average of 6.6% it's much better.

See our latest analysis for Evergreen Marine Corporation (Taiwan)

In the above chart we have measured Evergreen Marine Corporation (Taiwan)'s prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Evergreen Marine Corporation (Taiwan) for free.

What Can We Tell From Evergreen Marine Corporation (Taiwan)'s ROCE Trend?

Evergreen Marine Corporation (Taiwan) is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 17%. The amount of capital employed has increased too, by 195%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

To sum it up, Evergreen Marine Corporation (Taiwan) has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we found 2 warning signs for Evergreen Marine Corporation (Taiwan) (1 is potentially serious) 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.