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. 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. So when we looked at Star Bulk Carriers (NASDAQ:SBLK) and its trend of ROCE, we really liked what we saw.
Understanding Return On Capital Employed (ROCE)
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. To calculate this metric for Star Bulk Carriers, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.048 = US$168m ÷ (US$3.9b - US$394m) (Based on the trailing twelve months to June 2025).
Therefore, Star Bulk Carriers has an ROCE of 4.8%. Ultimately, that's a low return and it under-performs the Shipping industry average of 9.1%.
View our latest analysis for Star Bulk Carriers
Above you can see how the current ROCE for Star Bulk Carriers 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 Star Bulk Carriers for free.
What The Trend Of ROCE Can Tell Us
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 4.8%. The amount of capital employed has increased too, by 23%. So we're very much inspired by what we're seeing at Star Bulk Carriers thanks to its ability to profitably reinvest capital.
What We Can Learn From Star Bulk Carriers' ROCE
In summary, it's great to see that Star Bulk Carriers can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
One more thing, we've spotted 2 warning signs facing Star Bulk Carriers that you might find interesting.
While Star Bulk Carriers isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Valuation is complex, but we're here to simplify it.
Discover if Star Bulk Carriers might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.