Returns Are Gaining Momentum At Pingdingshan Tianan Coal. Mining (SHSE:601666)

There are a few key trends to look for if we want to identify the next 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Pingdingshan Tianan Coal. Mining (SHSE:601666) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Pingdingshan Tianan Coal. Mining is:

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

0.13 = CN¥6.5b ÷ (CN¥80b - CN¥31b) (Based on the trailing twelve months to March 2024).

Thus, Pingdingshan Tianan Coal. Mining has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 11% generated by the Oil and Gas industry.

Check out our latest analysis for Pingdingshan Tianan Coal. Mining

In the above chart we have measured Pingdingshan Tianan Coal. Mining's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Pingdingshan Tianan Coal. Mining .

What Does the ROCE Trend For Pingdingshan Tianan Coal. Mining Tell Us?

We like the trends that we're seeing from Pingdingshan Tianan Coal. Mining. The data shows that returns on capital have increased substantially over the last five years to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 72% more capital is being employed now too. 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.

The Bottom Line

All in all, it's terrific to see that Pingdingshan Tianan Coal. Mining is reaping the rewards from prior investments and is growing its capital base. And a remarkable 299% 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 them should be part of your investment process.

While Pingdingshan Tianan Coal. Mining may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com