We Think Castor Maritime (NASDAQ:CTRM) Might Have The DNA Of A Multi-Bagger

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Castor Maritime (NASDAQ:CTRM) looks great, so lets see what the trend can tell us.

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 Castor Maritime:

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

0.21 = US$124m ÷ (US$633m - US$51m) (Based on the trailing twelve months to December 2022).

Thus, Castor Maritime has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Shipping industry average of 17%.

View our latest analysis for Castor Maritime

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 Castor Maritime, check out these free graphs here.

So How Is Castor Maritime's ROCE Trending?

We like the trends that we're seeing from Castor Maritime. Over the last five years, returns on capital employed have risen substantially to 21%. Basically the business is earning more per dollar of capital invested and in addition to that, 6,553% more capital is being employed now too. So we're very much inspired by what we're seeing at Castor Maritime thanks to its ability to profitably reinvest capital.

Our Take On Castor Maritime's ROCE

All in all, it's terrific to see that Castor Maritime is reaping the rewards from prior investments and is growing its capital base. Although the company may be facing some issues elsewhere since the stock has plunged 78% in the last three years. Still, it's worth doing some further research to see if the trends will continue into the future.

Like most companies, Castor Maritime does come with some risks, and we've found 2 warning signs that you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.