Global Ship Lease (NYSE: GSL) returns are not growing


Finding a company with significant growth potential is not easy, but it is possible if we look at some key financial metrics. A common approach is to find a company that returns on capital employed (ROCE), which is combined with a growing be of the capital employed. When you see this, it usually means that it is a company with a great business model and lots of profitable reinvestment opportunities. Against this background, the ROCE is Global ship leasing (NYSE: GSL) looks decent right now, so let’s see what the trend in yields can tell us.

Return on Capital Employed (ROCE): What is it?

For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (its rate of return) as a percentage of the company’s capital. To calculate this metric for Global Ship Lease, this is the formula:

Return on capital employed = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.11 = $ 173 million ÷ ($ 1.8 billion – $ 195 million) (Based on the last twelve months through September 2021).

So, Global Ship Lease has a ROCE of 11%. In absolute terms, this is a pretty normal return, and it’s pretty close to the shipping industry average of 10%.

Check out our latest analysis for Global Ship Lease

NYSE: GSL Return on Capital Employed December 2, 2021

In the graph above, we measured Global Ship Lease’s past ROCE versus its past performance, but arguably the future is more important. If you want to see what analysts are predicting for the future, you should have ours for free Global Ship Lease report.

How are the returns developing?

Current return on investment, while decent, has not changed significantly. The company has earned a steady 11% over the past five years, and the company’s capital has increased 105% over that time. However, since 11% is a moderate ROCE, it’s good to see that a company can continue to invest at those decent returns. Over long periods of time, such returns may not be all that exciting, but with consistency they can pay off in terms of stock price returns.

The conclusion on the ROCE of Global Ship Lease

Ultimately, Global Ship Lease has demonstrated its ability to adequately reinvest capital for good returns. And since the stock has risen sharply over the past five years, the market seems to be expecting that trend to continue. While the positive underlying trends can be considered by investors, we still believe this stock is worth researching further.

If you want to know some of the risks we face at Global Ship Lease 4 warning signs (3 are significant!) That you should know before investing here.

While Global Ship Lease may not have the highest returns right now, we have compiled a list of companies that currently have a return on equity greater than 25%. look at that for free List here.

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This article from Simply Wall St is of a general nature. We only provide comments based on historical data and analyst projections using an unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamentals. Note that our analysis may not take into account the latest company announcements or quality material, which may be sensitive to the price. Simply Wall St has no position in any of the stocks mentioned.

About Christine Geisler

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