Returns At O-I Glass (NYSE:OI) Appear To Be Weighed Down

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at O-I Glass (NYSE:OI) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. Analysts use this formula to calculate it for O-I Glass:

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

0.073 = US$514m ÷ (US$9.4b - US$2.3b) (Based on the trailing twelve months to September 2024).

So, O-I Glass has an ROCE of 7.3%. Ultimately, that's a low return and it under-performs the Packaging industry average of 9.6%.

View our latest analysis for O-I Glass

In the above chart we have measured O-I Glass' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for O-I Glass .

So How Is O-I Glass' ROCE Trending?

Over the past five years, O-I Glass' ROCE and capital employed have both remained mostly flat. 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 O-I Glass doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

We can conclude that in regards to O-I Glass' returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 13% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think O-I Glass has the makings of a multi-bagger.

One more thing to note, we've identified 1 warning sign with O-I Glass and understanding it should be part of your investment process.

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. 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.