Taseko Mines' (TSE:TKO) Returns On Capital Are Heading Higher

By
Simply Wall St
Published
April 12, 2022
TSX:TKO
Source: Shutterstock

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Taseko Mines (TSE:TKO) and its trend of ROCE, we really liked what we saw.

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 Taseko Mines:

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

0.12 = CA$128m ÷ (CA$1.2b - CA$103m) (Based on the trailing twelve months to December 2021).

So, Taseko Mines has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 2.3% generated by the Metals and Mining industry.

Check out our latest analysis for Taseko Mines

roce
TSX:TKO Return on Capital Employed April 12th 2022

In the above chart we have measured Taseko Mines' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

The fact that Taseko Mines 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 12% which is a sight for sore eyes. In addition to that, Taseko Mines is employing 21% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Bottom Line

Overall, Taseko Mines gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And with a respectable 74% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Taseko Mines can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 2 warning signs for Taseko Mines you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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