CSN Mineração (BVMF:CMIN3) Might Have The Makings Of A Multi-Bagger

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in CSN Mineração's (BVMF:CMIN3) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on CSN Mineração is:

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

0.18 = R$4.1b ÷ (R$26b - R$3.8b) (Based on the trailing twelve months to June 2023).

Thus, CSN Mineração has an ROCE of 18%. That's a relatively normal return on capital, and it's around the 16% generated by the Metals and Mining industry.

See our latest analysis for CSN Mineração

Above you can see how the current ROCE for CSN Mineração compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering CSN Mineração here for free.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at CSN Mineração are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 18%. The amount of capital employed has increased too, by 72%. So we're very much inspired by what we're seeing at CSN Mineração thanks to its ability to profitably reinvest capital.

Our Take On CSN Mineração's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what CSN Mineração has. And with a respectable 82% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. 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.

If you want to know some of the risks facing CSN Mineração we've found 3 warning signs (2 are a bit concerning!) that you should be aware of before investing here.

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.

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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.