Returns on Capital Paint A Bright Future For Copper Mountain Mining (TSE:CMMC)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of Copper Mountain Mining (TSE:CMMC) we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Copper Mountain Mining is:

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

0.28 = CA$236m ÷ (CA$961m - CA$120m) (Based on the trailing twelve months to June 2021).

Therefore, Copper Mountain Mining has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 2.5%.

View our latest analysis for Copper Mountain Mining

Above you can see how the current ROCE for Copper Mountain Mining compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Copper Mountain Mining.

How Are Returns Trending?

The fact that Copper Mountain Mining is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 28% which is a sight for sore eyes. Not only that, but the company is utilizing 54% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On Copper Mountain Mining's ROCE

Overall, Copper Mountain Mining gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Since the stock has returned a staggering 530% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching Copper Mountain Mining, you might be interested to know about the 4 warning signs that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.
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