Shareholders Would Enjoy A Repeat Of Copper Mountain Mining's (TSE:CMMC) Recent Growth In Returns

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, the ROCE of Copper Mountain Mining (TSE:CMMC) looks great, so lets see what the trend can tell us.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Copper Mountain Mining, this is the formula:

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

0.31 = CA$289m ÷ (CA$1.0b - CA$86m) (Based on the trailing twelve months to December 2021).

So, Copper Mountain Mining has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 2.3% earned by companies in a similar industry.

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, you can check out the forecasts from the analysts covering Copper Mountain Mining here for free.

What Does the ROCE Trend For Copper Mountain Mining Tell Us?

Investors would be pleased with what's happening at Copper Mountain Mining. The data shows that returns on capital have increased substantially over the last five years to 31%. The amount of capital employed has increased too, by 73%. So we're very much inspired by what we're seeing at Copper Mountain Mining thanks to its ability to profitably reinvest capital.

The Bottom Line On Copper Mountain Mining'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 Copper Mountain Mining has. Since the stock has returned a staggering 246% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Copper Mountain Mining can keep these trends up, it could have a bright future ahead.

If you want to continue researching Copper Mountain Mining, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.