Stock Analysis

Returns At Pyxis Tankers (NASDAQ:PXS) Are On The Way Up

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If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Speaking of which, we noticed some great changes in Pyxis Tankers' (NASDAQ:PXS) returns on capital, so let's have a 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. The formula for this calculation on Pyxis Tankers is:

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

0.062 = US$7.5m ÷ (US$138m - US$17m) (Based on the trailing twelve months to September 2022).

Therefore, Pyxis Tankers has an ROCE of 6.2%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 17%.

Check out our latest analysis for Pyxis Tankers

NasdaqCM:PXS Return on Capital Employed March 16th 2023

Above you can see how the current ROCE for Pyxis Tankers 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 Pyxis Tankers.

The Trend Of ROCE

We're delighted to see that Pyxis Tankers is reaping rewards from its investments and has now broken into profitability. The company now earns 6.2% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Bottom Line

To bring it all together, Pyxis Tankers has done well to increase the returns it's generating from its capital employed. Since the stock has only returned 19% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One more thing: We've identified 3 warning signs with Pyxis Tankers (at least 1 which shouldn't be ignored) , and understanding them would certainly be useful.

While Pyxis Tankers 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.

What are the risks and opportunities for Pyxis Tankers?

Pyxis Tankers Inc. operates as a maritime transportation company with a focus on the tanker sector in the United States.

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  • Price-To-Earnings ratio (4.2x) is below the US market (15.1x)

  • Became profitable this year


  • Earnings are forecast to decline by an average of 11.5% per year for the next 3 years

  • Debt is not well covered by operating cash flow

  • Does not have a meaningful market cap ($52M)

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