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1 Important Number Investors Should Know About CWT Ltd

CWT Ltd (SGX: C14) is a logistics services provider that was founded in 1970 and listed on Singapore’s stock market 23 years ago in 1993. The company is today the largest home-grown logistics services provider.

The company’s logistics services include warehousing, transportation, freight forwarding, cargo consolidation, procurement, inventory management, and more. Beyond logistics, CWT also has interests in commodity marketing, engineering services, and financial services.

Over the last five years, CWT has been a solid winner in Singapore’s stock market with its share price climbing by 89%.

In here, I want to look at CWT’s return on invested capital (ROIC). In a previous article, I had explained how the ROIC metric can be used as a gauge for the quality of a business. For convenience, the math needed to calculate the ROIC is given below:

ROIC table

The simple idea behind the ROIC is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs while the reverse is true – a low ROIC is often associated with a low-quality business.

You can see how CWT’s ROIC looks like in the table below (I had used numbers from the company’s last completed fiscal year):

cwt-roic-table
Source: S&P Global Market Intelligence

We can see that the ROIC for CWT is 13.8%. This means that for every dollar of capital invested in the business, the company generates 13.8 cents in profit.

I have looked at the ROICs of many other Singapore-listed companies and CWT’s ROIC looks to be average. But that has not stopped the company from delivering solid business growth over the past decade – its book value per share has compounded at 14.9% annually in that period.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.