Returns At CH Offshore (SGX:C13) Are On The Way Up
CH Offshore (SGX:C13) shows promising trends with an increasing return on capital employed (ROCE) of 3.6%, despite being below the industry average of 5.2%. The company has improved its capital efficiency, utilizing 32% less capital than five years ago. Although it has only returned 16% to shareholders over the past five years, its capital allocation skills indicate potential for growth. However, investors should be cautious due to identified risks in the investment analysis.
There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, CH Offshore (SGX:C13) looks quite promising in regards to its trends of return on capital.
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What Is Return On Capital Employed (ROCE)?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for CH Offshore:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.036 = US$1.9m ÷ (US$66m - US$12m) (Based on the trailing twelve months to June 2025).
Therefore, CH Offshore has an ROCE of 3.6%. In absolute terms, that's a low return and it also under-performs the Energy Services industry average of 5.2%.
View our latest analysis for CH Offshore
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating CH Offshore's past further, check out this free graph covering CH Offshore's past earnings, revenue and cash flow.
The Trend Of ROCE
We're delighted to see that CH Offshore is reaping rewards from its investments and has now broken into profitability. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 3.6% on their capital employed. Additionally, the business is utilizing 32% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. CH Offshore could be selling under-performing assets since the ROCE is improving.
In Conclusion...
In the end, CH Offshore has proven it's capital allocation skills are good with those higher returns from less amount of capital. Since the stock has only returned 16% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.
CH Offshore does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...
While CH Offshore isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
