Returns Are Gaining Momentum At Jiangxi Copper (HKG:358)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Jiangxi Copper (HKG:358) so let's look a bit deeper.

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Return On Capital Employed (ROCE): What Is It?

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 Jiangxi Copper:

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

0.12 = CN¥12b ÷ (CN¥212b - CN¥110b) (Based on the trailing twelve months to March 2025).

Therefore, Jiangxi Copper has an ROCE of 12%. That's a pretty standard return and it's in line with the industry average of 12%.

View our latest analysis for Jiangxi Copper

In the above chart we have measured Jiangxi Copper's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Jiangxi Copper for free.

What Does the ROCE Trend For Jiangxi Copper Tell Us?

The trends we've noticed at Jiangxi Copper are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 12%. The amount of capital employed has increased too, by 57%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Another thing to note, Jiangxi Copper has a high ratio of current liabilities to total assets of 52%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Jiangxi Copper's ROCE

To sum it up, Jiangxi Copper has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 111% 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 Jiangxi Copper can keep these trends up, it could have a bright future ahead.

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

While Jiangxi Copper 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.