If you want to find stocks with the potential for long-term growth, what underlying trends should you look for? First, you want to identify what is growing. return In addition to capital employed (ROCE) continues to increase base of capital employed. After all, this shows that this is a business that is increasing its profitability and reinvesting its profits. Speaking of which, I noticed some big changes. kumba iron ore Let's take a look at (JSE:KIO)'s return on equity.
What is return on capital employed (ROCE)?
In case you aren't familiar, ROCE is a metric that measures how much pre-tax profit (as a percentage) a company earns on the capital invested in its business. To calculate this indicator for Kumba iron ore, use the following formula:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.38 = R29b ÷ (R87b – R12b) (Based on the previous 12 months to June 2023).
So, Kumba Iron Ore has an ROCE of 38%. In absolute terms, this is a significant gain, even better than the Metal Mining industry average of 16%.
See our latest analysis for Kumba Iron Ore.
Above you can see how Kumba Iron Ore's current ROCE compares to its previous return on capital, but history can only tell us so much. If you want to know what analysts are predicting for the future, check out this article. free Kumba Iron Ore Report.
What does Kumba Iron Ore's ROCE trend indicate?
We like the trends we're seeing from Kumba Iron Ore, with our data showing a strong return on capital of 38% over the past five years. The amount of capital used also increased by 38%. So we're very inspired by what we're seeing at Kumba Iron Ore where we can profitably reinvest capital.
conclusion
In summary, it's great to see that Kumba Iron Ore can double its earnings by continually reinvesting capital at increasing rates of return. Because these are some of the key ingredients in the very popular multibagger. And because stocks have performed so well over the past five years, investors are taking these patterns into account. So, given that this stock has proven to have an encouraging trend, it's worth investigating the company further to see if that trend is likely to persist.
Like most companies, Kumba Iron Ore involves some risks. 1 warning sign What you need to know.
If you want to find more stocks with high returns, check this out. free This is a list of stocks with strong balance sheets and high return on equity.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
