Oceanus Group (SGX:579) Might Have The Makings Of A Multi-Bagger

Yahoo

15-05-2025

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Oceanus Group (SGX:579) and its trend of ROCE, we really liked what we saw.
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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 Oceanus Group:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.028 = S$1.9m ÷ (S$175m - S$107m) (Based on the trailing twelve months to December 2024).
Thus, Oceanus Group has an ROCE of 2.8%. In absolute terms, that's a low return and it also under-performs the Food industry average of 13%.
View our latest analysis for Oceanus Group
Historical performance is a great place to start when researching a stock so above you can see the gauge for Oceanus Group's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Oceanus Group.
The fact that Oceanus Group is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 2.8% on its capital. Not only that, but the company is utilizing 202% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.
On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Effectively this means that suppliers or short-term creditors are now funding 61% of the business, which is more than it was five years ago. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.
Long story short, we're delighted to see that Oceanus Group's reinvestment activities have paid off and the company is now profitable. And a remarkable 200% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
On a final note, we found 3 warning signs for Oceanus Group (2 are significant) you should be aware of.
While Oceanus Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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