Polymetal International (LON:POLY) Is Achieving High Returns On Its Capital

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'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Polymetal International (LON:POLY) looks great, so lets see what the trend can tell us.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Polymetal International:

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

0.39 = US$1.5b ÷ (US$4.4b - US$632m) (Based on the trailing twelve months to December 2020).

So, Polymetal International has an ROCE of 39%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 14%.

View our latest analysis for Polymetal International

Above you can see how the current ROCE for Polymetal International compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Polymetal International.

What Can We Tell From Polymetal International's ROCE Trend?

Investors would be pleased with what's happening at Polymetal International. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 39%. Basically the business is earning more per dollar of capital invested and in addition to that, 128% 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.

Our Take On Polymetal International'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 Polymetal International has. Since the stock has returned a staggering 162% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Polymetal International can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for Polymetal International that we think you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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