Investors Will Want Sinomine Resource Group's (SZSE:002738) Growth In ROCE To Persist

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Sinomine Resource Group (SZSE:002738) looks quite promising in regards to its trends of return on capital.

Understanding 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. Analysts use this formula to calculate it for Sinomine Resource Group:

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

0.11 = CN¥1.4b ÷ (CN¥15b - CN¥2.2b) (Based on the trailing twelve months to June 2024).

So, Sinomine Resource Group has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Metals and Mining industry average of 7.0% it's much better.

Check out our latest analysis for Sinomine Resource Group

In the above chart we have measured Sinomine Resource Group'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 Sinomine Resource Group .

What Can We Tell From Sinomine Resource Group's ROCE Trend?

Sinomine Resource Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 11%. The amount of capital employed has increased too, by 329%. So we're very much inspired by what we're seeing at Sinomine Resource Group thanks to its ability to profitably reinvest capital.

Our Take On Sinomine Resource Group's ROCE

To sum it up, Sinomine Resource Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 276% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Sinomine Resource Group (of which 1 shouldn't be ignored!) that you should know about.

While Sinomine Resource Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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.