Pingdingshan Tianan Coal. Mining (SHSE:601666) Is Looking To Continue Growing Its Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Pingdingshan Tianan Coal. Mining's (SHSE:601666) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

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 Pingdingshan Tianan Coal. Mining:

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

0.12 = CN¥5.6b ÷ (CN¥74b - CN¥26b) (Based on the trailing twelve months to September 2024).

Therefore, Pingdingshan Tianan Coal. Mining has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Oil and Gas industry average of 10.0%.

See our latest analysis for Pingdingshan Tianan Coal. Mining

Above you can see how the current ROCE for Pingdingshan Tianan Coal. Mining compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Pingdingshan Tianan Coal. Mining .

So How Is Pingdingshan Tianan Coal. Mining's ROCE Trending?

We like the trends that we're seeing from Pingdingshan Tianan Coal. Mining. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 60%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Pingdingshan Tianan Coal. Mining's ROCE

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 Pingdingshan Tianan Coal. Mining has. And a remarkable 193% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Pingdingshan Tianan Coal. Mining can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 2 warning signs with Pingdingshan Tianan Coal. Mining and understanding these should be part of your investment process.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.