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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Ocean Wilsons Holdings (LON:OCN) looks quite promising in regards to its trends of return on capital.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Ocean Wilsons Holdings is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = US$140m ÷ (US$1.5b - US$186m) (Based on the trailing twelve months to June 2024).
Thus, Ocean Wilsons Holdings has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 12% generated by the Infrastructure industry.
See our latest analysis for Ocean Wilsons Holdings
Above you can see how the current ROCE for Ocean Wilsons Holdings 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 Ocean Wilsons Holdings for free.
So How Is Ocean Wilsons Holdings' ROCE Trending?
Ocean Wilsons Holdings is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 61% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.
What We Can Learn From Ocean Wilsons Holdings' ROCE
In summary, we're delighted to see that Ocean Wilsons Holdings has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 80% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Ocean Wilsons Holdings can keep these trends up, it could have a bright future ahead.