The Return Trends At Sirios Resources (CVE:SOI) Look Promising

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Sirios Resources' (CVE:SOI) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Sirios Resources, this is the formula:

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

0.013 = CA$482k ÷ (CA$37m - CA$652k) (Based on the trailing twelve months to December 2023).

So, Sirios Resources has an ROCE of 1.3%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 2.5%.

View our latest analysis for Sirios Resources

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sirios Resources' ROCE against it's prior returns. If you're interested in investigating Sirios Resources' past further, check out this free graph covering Sirios Resources' past earnings, revenue and cash flow.

The Trend Of ROCE

The fact that Sirios Resources is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 1.3% on its capital. And unsurprisingly, like most companies trying to break into the black, Sirios Resources is utilizing 36% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line On Sirios Resources' ROCE

In summary, it's great to see that Sirios Resources has managed to break into profitability and is continuing to reinvest in its business. Although the company may be facing some issues elsewhere since the stock has plunged 77% in the last five years. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

On a final note, we found 5 warning signs for Sirios Resources (3 are a bit unpleasant) 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.