Slowing Rates Of Return At Inter-Rock Minerals (CVE:IRO) Leave Little Room For Excitement

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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, the ROCE of Inter-Rock Minerals (CVE:IRO) looks decent, right now, so lets see what the trend of returns can tell us.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Inter-Rock Minerals:

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

0.17 = US$3.5m ÷ (US$30m - US$10m) (Based on the trailing twelve months to September 2025).

Thus, Inter-Rock Minerals has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 11% it's much better.

View our latest analysis for Inter-Rock Minerals

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

What Can We Tell From Inter-Rock Minerals' ROCE Trend?

While the returns on capital are good, they haven't moved much. The company has consistently earned 17% for the last five years, and the capital employed within the business has risen 39% in that time. Since 17% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

In the end, Inter-Rock Minerals has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 190% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Inter-Rock Minerals does have some risks, we noticed 3 warning signs (and 1 which is a bit concerning) we think you should know about.

While Inter-Rock Minerals isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.