Why We Like The Returns At Navios Maritime Holdings (NYSE:NM)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Navios Maritime Holdings (NYSE:NM) looks great, so lets see what the trend can tell us.

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. Analysts use this formula to calculate it for Navios Maritime Holdings:

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

0.28 = US$231m ÷ (US$912m - US$91m) (Based on the trailing twelve months to September 2022).

Thus, Navios Maritime Holdings has an ROCE of 28%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

Check out our latest analysis for Navios Maritime Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Navios Maritime Holdings' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Navios Maritime Holdings, check out these free graphs here.

The Trend Of ROCE

We're delighted to see that Navios Maritime Holdings is reaping rewards from its investments and has now broken into profitability. While the business is profitable now, it used to be incurring losses on invested capital five years ago. In regards to capital employed, Navios Maritime Holdings is using 66% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

The Bottom Line

In a nutshell, we're pleased to see that Navios Maritime Holdings has been able to generate higher returns from less capital. However the stock is down a substantial 81% in the last five years so there could be other areas of the business hurting its prospects. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

On a separate note, we've found 1 warning sign for Navios Maritime Holdings you'll probably want to know about.

Navios Maritime Holdings is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.