Orogen Royalties (CVE:OGN) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 Orogen Royalties' (CVE:OGN) returns on capital, so let's have a look.

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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. To calculate this metric for Orogen Royalties, this is the formula:

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

0.048 = CA$3.4m ÷ (CA$72m - CA$1.9m) (Based on the trailing twelve months to March 2025).

Therefore, Orogen Royalties has an ROCE of 4.8%. On its own that's a low return, but compared to the average of 3.9% generated by the Metals and Mining industry, it's much better.

Check out our latest analysis for Orogen Royalties

Historical performance is a great place to start when researching a stock so above you can see the gauge for Orogen Royalties' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Orogen Royalties.

How Are Returns Trending?

We're delighted to see that Orogen Royalties is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 4.8% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Orogen Royalties is utilizing 641% more capital than it was five years ago. 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.

In Conclusion...

Overall, Orogen Royalties 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 a remarkable 208% total return over the last five years tells us that investors are expecting more good things to come in the future. 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'd like to know about the risks facing Orogen Royalties, we've discovered 2 warning signs that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.