Globus Maritime (NASDAQ:GLBS) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Globus Maritime's (NASDAQ:GLBS) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Globus Maritime, this is the formula:

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

0.0052 = US$1.5m ÷ (US$321m - US$35m) (Based on the trailing twelve months to December 2024).

Thus, Globus Maritime has an ROCE of 0.5%. Ultimately, that's a low return and it under-performs the Shipping industry average of 9.4%.

Check out our latest analysis for Globus Maritime

Above you can see how the current ROCE for Globus Maritime compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Globus Maritime for free.

So How Is Globus Maritime's ROCE Trending?

The fact that Globus Maritime is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 0.5% which is a sight for sore eyes. Not only that, but the company is utilizing 510% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On Globus Maritime's ROCE

Long story short, we're delighted to see that Globus Maritime's reinvestment activities have paid off and the company is now profitable. Although the company may be facing some issues elsewhere since the stock has plunged 98% in the last five years. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

One more thing: We've identified 4 warning signs with Globus Maritime (at least 2 which can't be ignored) , and understanding them would certainly be useful.

While Globus Maritime may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.