Investors Shouldn't Overlook K92 Mining's (TSE:KNT) Impressive Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 K92 Mining's (TSE:KNT) returns on capital, so let's have a look.

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What Is 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 K92 Mining is:

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

0.41 = US$258m ÷ (US$721m - US$95m) (Based on the trailing twelve months to March 2025).

Therefore, K92 Mining has an ROCE of 41%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 4.5%.

See our latest analysis for K92 Mining

In the above chart we have measured K92 Mining's 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 K92 Mining for free.

What Can We Tell From K92 Mining's ROCE Trend?

The trends we've noticed at K92 Mining are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 41%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 352%. 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

To sum it up, K92 Mining has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for K92 Mining (of which 1 is concerning!) that you should know about.

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.