Yahoo Finance Atlantic Navigation Holdings (Singapore) (Catalist:5UL) Is Looking To Continue Growing Its Returns On Capital
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Atlantic Navigation Holdings (Singapore) (Catalist:5UL) so let's look a bit deeper.
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. Analysts use this formula to calculate it for Atlantic Navigation Holdings (Singapore):
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = US$21m ÷ (US$174m - US$34m) (Based on the trailing twelve months to June 2023).
Therefore, Atlantic Navigation Holdings (Singapore) has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Energy Services industry average of 5.9% it's much better.
Check out our latest analysis for Atlantic Navigation Holdings (Singapore)
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Atlantic Navigation Holdings (Singapore) has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
The Trend Of ROCE
Atlantic Navigation Holdings (Singapore) has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 15% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.
In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 20%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So this improvement in ROCE has come from the business' underlying economics, which is great to see.
The Bottom Line
To bring it all together, Atlantic Navigation Holdings (Singapore) has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 180% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Atlantic Navigation Holdings (Singapore) can keep these trends up, it could have a bright future ahead.
If you want to continue researching Atlantic Navigation Holdings (Singapore), you might be interested to know about the 2 warning signs that our analysis has discovered.
While Atlantic Navigation Holdings (Singapore) may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
