Returns Are Gaining Momentum At Auric Mining (ASX:AWJ)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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, we've noticed some promising trends at Auric Mining (ASX:AWJ) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for Auric Mining, this is the formula:

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

0.14 = AU$2.3m ÷ (AU$17m - AU$364k) (Based on the trailing twelve months to June 2024).

Therefore, Auric Mining has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Metals and Mining industry average of 10% it's much better.

View our latest analysis for Auric Mining

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 Auric Mining's past further, check out this free graph covering Auric Mining's past earnings, revenue and cash flow.

So How Is Auric Mining's ROCE Trending?

Auric Mining has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses three years ago, but now it's earning 14% which is a sight for sore eyes. Not only that, but the company is utilizing 68% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line On Auric Mining's ROCE

Long story short, we're delighted to see that Auric Mining's reinvestment activities have paid off and the company is now profitable. And a remarkable 174% total return over the last three years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Auric Mining can keep these trends up, it could have a bright future ahead.

Auric Mining does have some risks though, and we've spotted 3 warning signs for Auric Mining that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.