If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Although, when we looked at United Maritime (NASDAQ:USEA), it didn't seem to tick all of these boxes.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on United Maritime is:

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

0.035 = US$3.7m ÷ (US$171m - US$65m) (Based on the trailing twelve months to June 2024).

Therefore, United Maritime has an ROCE of 3.5%. Ultimately, that's a low return and it under-performs the Shipping industry average of 9.3%.

See our latest analysis for United Maritime

In the above chart we have measured United 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 United Maritime .

So How Is United Maritime's ROCE Trending?

In terms of United Maritime's historical ROCE movements, the trend isn't fantastic. Over the last three years, returns on capital have decreased to 3.5% from 13% three years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

While on the subject, we noticed that the ratio of current liabilities to total assets has risen to 38%, which has impacted the ROCE. If current liabilities hadn't increased as much as they did, the ROCE could actually be even lower. Keep an eye on this ratio, because the business could encounter some new risks if this metric gets too high.

The Bottom Line

While returns have fallen for United Maritime in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And the stock has followed suit returning a meaningful 15% to shareholders over the last year. So should these growth trends continue, we'd be optimistic on the stock going forward.