We Like Wesdome Gold Mines' (TSE:WDO) Returns And Here's How They're Trending

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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 Wesdome Gold Mines (TSE:WDO) we really liked what we saw.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

What Is Return On Capital Employed (ROCE)?

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 Wesdome Gold Mines, this is the formula:

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

0.29 = CA$203m ÷ (CA$747m - CA$54m) (Based on the trailing twelve months to December 2024).

Thus, Wesdome Gold Mines has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 3.9%.

Check out our latest analysis for Wesdome Gold Mines

Above you can see how the current ROCE for Wesdome Gold Mines 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 analyst report for Wesdome Gold Mines .

The Trend Of ROCE

We like the trends that we're seeing from Wesdome Gold Mines. The data shows that returns on capital have increased substantially over the last five years to 29%. Basically the business is earning more per dollar of capital invested and in addition to that, 169% more capital is being employed now too. So we're very much inspired by what we're seeing at Wesdome Gold Mines thanks to its ability to profitably reinvest capital.

The Bottom Line On Wesdome Gold Mines' 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 Wesdome Gold Mines has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 92% return over the last five years. In light of that, we think it's worth looking further into this stock because if Wesdome Gold Mines can keep these trends up, it could have a bright future ahead.

While Wesdome Gold Mines looks impressive, no company is worth an infinite price. The intrinsic value infographic for WDO helps visualize whether it is currently trading for a fair price.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.