U-Ming Marine Transport (TWSE:2606) Is Looking To Continue Growing Its Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. Speaking of which, we noticed some great changes in U-Ming Marine Transport's (TWSE:2606) 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. The formula for this calculation on U-Ming Marine Transport is:

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

0.061 = NT$4.5b ÷ (NT$88b - NT$14b) (Based on the trailing twelve months to December 2024).

Thus, U-Ming Marine Transport has an ROCE of 6.1%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.4%.

View our latest analysis for U-Ming Marine Transport

Above you can see how the current ROCE for U-Ming Marine Transport compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for U-Ming Marine Transport .

What Can We Tell From U-Ming Marine Transport's ROCE Trend?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 6.1%. The amount of capital employed has increased too, by 56%. So we're very much inspired by what we're seeing at U-Ming Marine Transport thanks to its ability to profitably reinvest capital.

The Bottom Line On U-Ming Marine Transport's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what U-Ming Marine Transport has. And a remarkable 237% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

U-Ming Marine Transport does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is potentially serious...

While U-Ming Marine Transport 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.