Globus Maritime (NASDAQ:GLBS) Is Doing The Right Things To Multiply Its Share Price
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. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Globus Maritime (NASDAQ:GLBS) looks quite promising in regards to its trends of return on capital.
What is Return On Capital Employed (ROCE)?
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 Globus Maritime:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = US$18m ÷ (US$186m - US$12m) (Based on the trailing twelve months to December 2021).
So, Globus Maritime has an ROCE of 10%. In absolute terms, that's a pretty standard return but compared to the Shipping industry average it falls behind.
Check out our latest analysis for Globus Maritime
Above you can see how the current ROCE for Globus Maritime 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 Globus Maritime.
How Are Returns Trending?
The fact that Globus Maritime is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 10% on its capital. In addition to that, Globus Maritime is employing 176% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.
On a related note, the company's ratio of current liabilities to total assets has decreased to 6.5%, which basically reduces it's funding from the likes of short-term creditors or suppliers. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.
Our Take On Globus Maritime's ROCE
Overall, Globus Maritime gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Although the company may be facing some issues elsewhere since the stock has plunged 100% in the last five years. Still, it's worth doing some further research to see if the trends will continue into the future.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Globus Maritime (of which 2 can't be ignored!) that you should know about.
While Globus Maritime isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
