Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after briefly looking over the numbers, we don't think Norwegian Cruise Line Holdings (NYSE:NCLH) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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 Norwegian Cruise Line Holdings:

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

0.10 = US$1.4b ÷ (US$20b - US$6.0b) (Based on the trailing twelve months to September 2024).

So, Norwegian Cruise Line Holdings has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 8.5% generated by the Hospitality industry.

In the above chart we have measured Norwegian Cruise Line Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Norwegian Cruise Line Holdings .

What Does the ROCE Trend For Norwegian Cruise Line Holdings Tell Us?

Over the past five years, Norwegian Cruise Line Holdings' ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Norwegian Cruise Line Holdings doesn't end up being a multi-bagger in a few years time.

The Bottom Line On Norwegian Cruise Line Holdings' ROCE

In a nutshell, Norwegian Cruise Line Holdings has been trudging along with the same returns from the same amount of capital over the last five years. And investors appear hesitant that the trends will pick up because the stock has fallen 50% in the last five years. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Norwegian Cruise Line Holdings (of which 1 is concerning!) that you should know about.

While Norwegian Cruise Line Holdings 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.