Mangazeya Mining (CVE:MGZ.H) Might Become A Compounding Machine

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at Mangazeya Mining's (CVE:MGZ.H) ROCE trend, we were very happy with what we saw.

What is 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. To calculate this metric for Mangazeya Mining, this is the formula:

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

0.23 = CA$61m ÷ (CA$333m - CA$67m) (Based on the trailing twelve months to March 2021).

Thus, Mangazeya Mining has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 0.8% earned by companies in a similar industry.

View our latest analysis for Mangazeya Mining

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Mangazeya Mining, check out these free graphs here.

How Are Returns Trending?

We'd be pretty happy with returns on capital like Mangazeya Mining. The company has consistently earned 23% for the last five years, and the capital employed within the business has risen 371% in that time. Now considering ROCE is an attractive 23%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If Mangazeya Mining can keep this up, we'd be very optimistic about its future.

The Bottom Line

Mangazeya Mining has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. On top of that, the stock has rewarded shareholders with a remarkable 157% return to those who've held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you'd like to know more about Mangazeya Mining, we've spotted 2 warning signs, and 1 of them is a bit concerning.

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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