Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. 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)?

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 Globus Maritime:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.012 = US$3.1m ÷ (US$280m - US$14m) (Based on the trailing twelve months to September 2024).

So, Globus Maritime has an ROCE of 1.2%. Ultimately, that's a low return and it under-performs the Shipping industry average of 10%.

Check out our latest analysis for Globus Maritime

In the above chart we have measured Globus Maritime's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Globus Maritime .

What Does the ROCE Trend For Globus Maritime Tell Us?

We're delighted to see that Globus Maritime is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 1.2% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Globus Maritime is utilizing 246% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line On Globus Maritime's ROCE

To the delight of most shareholders, Globus Maritime has now broken into profitability. Although the company may be facing some issues elsewhere since the stock has plunged 97% in the last five years. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

Globus Maritime does have some risks, we noticed 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

While Globus Maritime 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.