Tribune Resources' (ASX:TBR) Returns On Capital Tell Us There Is Reason To Feel Uneasy

To avoid investing in a business that's in decline, there's a few financial metrics that can provide early indications of aging. When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. So after we looked into Tribune Resources (ASX:TBR), the trends above didn't look too great.

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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. Analysts use this formula to calculate it for Tribune Resources:

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

0.18 = AU$60m ÷ (AU$350m - AU$24m) (Based on the trailing twelve months to June 2025).

Thus, Tribune Resources has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 9.2% generated by the Metals and Mining industry.

See our latest analysis for Tribune Resources

Historical performance is a great place to start when researching a stock so above you can see the gauge for Tribune Resources' ROCE against it's prior returns. If you'd like to look at how Tribune Resources has performed in the past in other metrics, you can view this free graph of Tribune Resources' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

There is reason to be cautious about Tribune Resources, given the returns are trending downwards. To be more specific, the ROCE was 27% five years ago, but since then it has dropped noticeably. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. Companies that exhibit these attributes tend to not be shrinking, but they can be mature and facing pressure on their margins from competition. If these trends continue, we wouldn't expect Tribune Resources to turn into a multi-bagger.

The Bottom Line On Tribune Resources' ROCE

In the end, the trend of lower returns on the same amount of capital isn't typically an indication that we're looking at a growth stock. Investors must expect better things on the horizon though because the stock has risen 23% in the last five years. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere.

Tribune Resources does have some risks though, and we've spotted 1 warning sign for Tribune Resources that you might be interested in.

While Tribune Resources 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.