Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. With that in mind, the ROCE of Jinhui Mining (SHSE:603132) looks decent, right now, so lets see what the trend of returns can tell us.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Jinhui Mining:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = CN¥602m ÷ (CN¥5.0b - CN¥675m) (Based on the trailing twelve months to December 2022).
Thus, Jinhui Mining has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 8.3% generated by the Metals and Mining industry.
View our latest analysis for Jinhui Mining
Historical performance is a great place to start when researching a stock so above you can see the gauge for Jinhui Mining's ROCE against it's prior returns. If you'd like to look at how Jinhui Mining has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
So How Is Jinhui Mining's ROCE Trending?
The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 111% more capital in the last four years, and the returns on that capital have remained stable at 14%. 14% is a pretty standard return, and it provides some comfort knowing that Jinhui Mining has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.
On a side note, Jinhui Mining has done well to reduce current liabilities to 13% of total assets over the last four years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.
The main thing to remember is that Jinhui Mining has proven its ability to continually reinvest at respectable rates of return. Despite the good fundamentals, total returns from the stock have been virtually flat over the last year. For that reason, savvy investors might want to look further into this company in case it's a prime investment.
While Jinhui Mining doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.
While Jinhui Mining 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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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.