Capital returns show encouraging signs at Globus Maritime (NASDAQ: GLBS)


If we are to find multi-bagger potential, there are often underlying trends that can provide clues. Among other things, we’ll want to see two things; first of all, a growth to return to on capital employed (ROCE) and on the other hand, an expansion of the quantity capital employed. Basically, this means that a business has profitable initiatives that it can keep reinvesting in, which is a hallmark of a dialing machine. So on that note, Globus Maritime (NASDAQ: GLBS) looks pretty promising when it comes to its return on capital trends.

What is Return on Employee Capital (ROCE)?

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. Analysts use this formula to calculate it for Globus Maritime:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.035 = US $ 5.7 million ÷ (US $ 174 million – US $ 9.6 million) (Based on the last twelve months up to September 2021).

Thereby, Globus Maritime posted a ROCE of 3.5%. In absolute terms, this is a low return and it is also below the shipping industry average by 10%.

NasdaqCM: GLBS Review of the capital employed on December 18, 2021

Above you can see how Globus Maritime’s current ROCE compares to its previous returns on capital, but there is little you can say about the past. If you are interested, you can view analyst forecasts in our free analyst forecast report for the company.

What can we say about the ROCE trend of Globus Maritime?

We are delighted to see that Globus Maritime is reaping the rewards of its investments and is now generating pre-tax profits. The company was making losses five years ago, but is now gaining 3.5%, which hurts the eyes. And unsurprisingly, like most companies trying to break into the dark, Globus Maritime is using 205% more capital than it was five years ago. We like this trend because it tells us that the company has profitable reinvestment opportunities, and if it keeps moving forward it can lead to multi-bagger performance.

One more thing to note, Globus Maritime reduced current liabilities to 5.5% of total assets during this period, effectively reducing the amount of supplier or short-term creditors funding. Therefore, we can be assured that ROCE growth is the result of fundamental company improvements, rather than a cooking class featuring that company’s books.

Our opinion on Globus Maritime’s ROCE

Overall Globus Maritime is getting a big boost from us thanks in large part to the fact that it is now profitable and is reinvesting in its business. Although the company may face problems elsewhere, with the stock having plunged 100% in the past five years. Either way, we believe the economic trends for this company are positive and that a closer look at the stock could prove to be rewarding.

One more thing: we have identified 4 warning signs with Globus Maritime (at least 2 which are significant), and understanding them would certainly be helpful.

If you want to look for solid businesses with great income, check out this free list of companies with good balance sheets and impressive returns on equity.

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