We Like Andean Precious Metals' (TSE:APM) Returns And Here's How They're Trending

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Andean Precious Metals' (TSE:APM) returns on capital, so let's have a look.

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What Is 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. To calculate this metric for Andean Precious Metals, this is the formula:

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

0.30 = US$87m ÷ (US$371m - US$86m) (Based on the trailing twelve months to September 2025).

Thus, Andean Precious Metals has an ROCE of 30%. That's a fantastic return and not only that, it outpaces the average of 6.2% earned by companies in a similar industry.

Check out our latest analysis for Andean Precious Metals

In the above chart we have measured Andean Precious Metals' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Andean Precious Metals for free.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Andean Precious Metals. Over the last five years, returns on capital employed have risen substantially to 30%. The amount of capital employed has increased too, by 401%. 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

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 Andean Precious Metals has. And a remarkable 812% total return over the last three years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Andean Precious Metals does have some risks, we noticed 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.