Yahoo Finance Marine Products (NYSE:MPX) Is Aiming To Keep Up Its Impressive Returns
What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. 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, the ROCE of Marine Products (NYSE:MPX) looks attractive right now, so lets see what the trend of returns can tell us.
Return On Capital Employed (ROCE): What is it?
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. Analysts use this formula to calculate it for Marine Products:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.32 = US$36m ÷ (US$133m - US$18m) (Based on the trailing twelve months to December 2021).
So, Marine Products has an ROCE of 32%. In absolute terms that's a great return and it's even better than the Leisure industry average of 20%.
See our latest analysis for Marine Products
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're interested in investigating Marine Products' past further, check out this free graph of past earnings, revenue and cash flow.
So How Is Marine Products' ROCE Trending?
We'd be pretty happy with returns on capital like Marine Products. The company has consistently earned 32% for the last five years, and the capital employed within the business has risen 61% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. You'll see this when looking at well operated businesses or favorable business models.
The Bottom Line On Marine Products' ROCE
In short, we'd argue Marine Products has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And given the stock has only risen 34% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Marine Products is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.
On a final note, we've found 1 warning sign for Marine Products that we think you should be aware of.
High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.
