Under The Bonnet, HIVE Blockchain Technologies' (CVE:HIVE) Returns Look Impressive

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So when we looked at the ROCE trend of HIVE Blockchain Technologies (CVE:HIVE) we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for HIVE Blockchain Technologies:

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

0.35 = US$167m ÷ (US$487m - US$15m) (Based on the trailing twelve months to December 2021).

Therefore, HIVE Blockchain Technologies has an ROCE of 35%. In absolute terms that's a great return and it's even better than the Software industry average of 6.6%.

See our latest analysis for HIVE Blockchain Technologies

In the above chart we have measured HIVE Blockchain Technologies' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering HIVE Blockchain Technologies here for free.

How Are Returns Trending?

We're delighted to see that HIVE Blockchain Technologies is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses four years ago, but now it's earning 35% which is a sight for sore eyes. Not only that, but the company is utilizing 204% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On HIVE Blockchain Technologies' ROCE

In summary, it's great to see that HIVE Blockchain Technologies has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 231% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

HIVE Blockchain Technologies does have some risks, we noticed 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

HIVE Blockchain Technologies is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.