Yahoo Finance There's Been No Shortage Of Growth Recently For Castor Maritime's (NASDAQ:CTRM) Returns On Capital
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Speaking of which, we noticed some great changes in Castor Maritime's (NASDAQ:CTRM) returns on capital, so let's have a look.
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)
0.16 = US$76m ÷ (US$529m - US$44m) (Based on the trailing twelve months to March 2022).
Therefore, Castor Maritime has an ROCE of 16%. By itself that's a normal return on capital and it's in line with the industry's average returns of 16%.
View 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'd like to look at how Castor Maritime has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
What Can We Tell From Castor Maritime's ROCE Trend?
Castor Maritime is displaying some positive trends. The data shows that returns on capital have increased substantially over the last four years to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 5,302% more capital is being employed now too. So we're very much inspired by what we're seeing at Castor Maritime thanks to its ability to profitably reinvest capital.
The Bottom Line
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Castor Maritime has. And since the stock has dived 97% over the last three years, there may be other factors affecting the company's prospects. Still, it's worth doing some further research to see if the trends will continue into the future.
On a final note, we found 3 warning signs for Castor Maritime (1 is concerning) you should be aware of.
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.
