Why The 35% Return On Capital At Soma Gold (CVE:SOMA) Should Have Your Attention

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at the ROCE trend of Soma Gold (CVE:SOMA) we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for Soma Gold:

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

0.35 = CA$22m ÷ (CA$85m - CA$21m) (Based on the trailing twelve months to March 2025).

So, Soma Gold has an ROCE of 35%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 4.0%.

See our latest analysis for Soma Gold

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'd like to look at how Soma Gold has performed in the past in other metrics, you can view this free graph of Soma Gold's past earnings, revenue and cash flow.

So How Is Soma Gold's ROCE Trending?

Investors would be pleased with what's happening at Soma Gold. The numbers show that in the last four years, the returns generated on capital employed have grown considerably to 35%. Basically the business is earning more per dollar of capital invested and in addition to that, 211% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

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 Soma Gold has. And with a respectable 92% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing Soma Gold, we've discovered 3 warning signs that you should be aware of.

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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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.