Castor Maritime (NASDAQ:CTRM) Hasn't Managed To Accelerate Its Returns
There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Castor Maritime's (NASDAQ:CTRM) trend of ROCE, we liked what we saw.
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 Castor Maritime is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = US$69m ÷ (US$602m - US$32m) (Based on the trailing twelve months to September 2023).
Therefore, Castor Maritime has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Shipping industry.
See our latest analysis for Castor Maritime
Historical performance is a great place to start when researching a stock so above you can see the gauge for Castor Maritime's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Castor Maritime, check out these free graphs here.
So How Is Castor Maritime's ROCE Trending?
While the current returns on capital are decent, they haven't changed much. The company has employed 5,912% more capital in the last five years, and the returns on that capital have remained stable at 12%. Since 12% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
The Bottom Line
To sum it up, Castor Maritime has simply been reinvesting capital steadily, at those decent rates of return. Yet over the last three years the stock has declined 63%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.
Castor Maritime does have some risks though, and we've spotted 3 warning signs for Castor Maritime that you might be interested in.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
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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.
