Investors Will Want Globus Maritime's (NASDAQ:GLBS) Growth In ROCE To Persist

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, we've noticed some promising trends at Globus Maritime (NASDAQ:GLBS) so let's look a bit deeper.

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 Globus Maritime:

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

0.0087 = US$2.1m ÷ (US$256m - US$12m) (Based on the trailing twelve months to June 2024).

Thus, Globus Maritime has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 9.5%.

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 analyst report for Globus Maritime .

What Does the ROCE Trend For Globus Maritime Tell Us?

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 0.9% on its capital. In addition to that, Globus Maritime is employing 211% more capital than previously which is expected of a company that's 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.

The Bottom Line 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. And since the stock has dived 99% over the last five years, there may be other factors affecting the company's prospects. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

Globus Maritime does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those can't be ignored...

While Globus Maritime 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.