Globus Maritime (NASDAQ:GLBS) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. So on that note, Globus Maritime (NASDAQ:GLBS) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

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. The formula for this calculation on Globus Maritime is:

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

0.035 = US$5.7m ÷ (US$174m - US$9.6m) (Based on the trailing twelve months to September 2021).

Therefore, Globus Maritime has an ROCE of 3.5%. Ultimately, that's a low return and it under-performs the Shipping industry average of 14%.

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 to see what analysts are forecasting going forward, you should check out our free report for Globus Maritime.

So How Is Globus Maritime's ROCE Trending?

Globus Maritime has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 3.5% on its capital. Not only that, but the company is utilizing 205% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

On a related note, the company's ratio of current liabilities to total assets has decreased to 5.5%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that Globus Maritime has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line On Globus Maritime's ROCE

Overall, Globus Maritime gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Although the company may be facing some issues elsewhere since the stock has plunged 100% in the last five years. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

Globus Maritime does have some risks, we noticed 4 warning signs (and 2 which are significant) we think you should know about.

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.