The Return Trends At Almadex Minerals (CVE:DEX) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Speaking of which, we noticed some great changes in Almadex Minerals' (CVE:DEX) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Almadex Minerals is:

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

0.095 = CA$2.6m ÷ (CA$29m - CA$899k) (Based on the trailing twelve months to September 2022).

So, Almadex Minerals has an ROCE of 9.5%. In absolute terms, that's a low return, but it's much better than the Metals and Mining industry average of 1.6%.

View our latest analysis for Almadex Minerals

Historical performance is a great place to start when researching a stock so above you can see the gauge for Almadex Minerals' ROCE against it's prior returns. If you'd like to look at how Almadex Minerals has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

We're delighted to see that Almadex Minerals is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 9.5% on its capital. In addition to that, Almadex Minerals is employing 85% 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 On Almadex Minerals' ROCE

In summary, it's great to see that Almadex Minerals has managed to break into profitability and is continuing to reinvest in its business. And with a respectable 74% awarded to those who held the stock over the last three years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to know some of the risks facing Almadex Minerals we've found 4 warning signs (1 is concerning!) that you should be aware of before investing here.

While Almadex Minerals may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.