- Hong Kong
- Metals and Mining
The Return Trends At China Daye Non-Ferrous Metals Mining (HKG:661) Look Promising
If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Speaking of which, we noticed some great changes in China Daye Non-Ferrous Metals Mining's (HKG:661) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for China Daye Non-Ferrous Metals Mining, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.056 = CN¥569m ÷ (CN¥18b - CN¥8.2b) (Based on the trailing twelve months to June 2022).
Thus, China Daye Non-Ferrous Metals Mining has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 12%.
View our latest analysis for China Daye Non-Ferrous Metals Mining
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how China Daye Non-Ferrous Metals Mining has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
So How Is China Daye Non-Ferrous Metals Mining's ROCE Trending?
China Daye Non-Ferrous Metals Mining is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 83% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
Another thing to note, China Daye Non-Ferrous Metals Mining has a high ratio of current liabilities to total assets of 45%. 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 China Daye Non-Ferrous Metals Mining's ROCE
As discussed above, China Daye Non-Ferrous Metals Mining appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And since the stock has fallen 23% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for China Daye Non-Ferrous Metals Mining (of which 1 makes us a bit uncomfortable!) that you should know about.
While China Daye Non-Ferrous Metals Mining isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Valuation is complex, but we're helping make it simple.
Find out whether China Daye Non-Ferrous Metals Mining is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
China Daye Non-Ferrous Metals Mining
China Daye Non-Ferrous Metals Mining Limited, an investment holding company, engages in the exploration, development, mining, and processing of mineral ores in China, Hong Kong, and the Republic of Mongolia.
Mediocre balance sheet and slightly overvalued.