Zijin Mining Group (HKG:2899) Is Experiencing Growth In Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Zijin Mining Group's (HKG:2899) returns on capital, so let's have a look.

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 Zijin Mining Group is:

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

0.12 = CN¥32b ÷ (CN¥356b - CN¥87b) (Based on the trailing twelve months to March 2024).

Thus, Zijin Mining Group has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 11% generated by the Metals and Mining industry.

See our latest analysis for Zijin Mining Group

Above you can see how the current ROCE for Zijin Mining Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Zijin Mining Group for free.

What Can We Tell From Zijin Mining Group's ROCE Trend?

Zijin Mining Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 12%. The amount of capital employed has increased too, by 244%. So we're very much inspired by what we're seeing at Zijin Mining Group thanks to its ability to profitably reinvest capital.

What We Can Learn From Zijin Mining Group's ROCE

All in all, it's terrific to see that Zijin Mining Group is reaping the rewards from prior investments and is growing its capital base. And a remarkable 559% 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 Zijin Mining Group can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for Zijin Mining Group that we think you should be aware of.

While Zijin Mining 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.

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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.