CSN Mineração (BVMF:CMIN3) Is Investing Its Capital With Increasing Efficiency

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at CSN Mineração's (BVMF:CMIN3) look very promising so lets take a look.

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 CSN Mineração:

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

0.21 = R$5.2b ÷ (R$30b - R$4.6b) (Based on the trailing twelve months to September 2023).

Therefore, CSN Mineração has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

View our latest analysis for CSN Mineração

In the above chart we have measured CSN Mineração's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

We like the trends that we're seeing from CSN Mineração. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 21%. The amount of capital employed has increased too, by 91%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

To sum it up, CSN Mineração has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 55% return over the last year. In light of that, we think it's worth looking further into this stock because if CSN Mineração can keep these trends up, it could have a bright future ahead.

CSN Mineração does have some risks, we noticed 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

CSN Mineração is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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.