Why We Like The Returns At Hindustan Copper (NSE:HINDCOPPER)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at Hindustan Copper's (NSE:HINDCOPPER) look very promising so lets take a look.

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What Is Return On Capital Employed (ROCE)?

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. To calculate this metric for Hindustan Copper, this is the formula:

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

0.21 = ₹6.4b ÷ (₹35b - ₹4.9b) (Based on the trailing twelve months to March 2025).

Therefore, Hindustan Copper has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 13%.

View our latest analysis for Hindustan Copper

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hindustan Copper's ROCE against it's prior returns. If you'd like to look at how Hindustan Copper has performed in the past in other metrics, you can view this free graph of Hindustan Copper's past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that Hindustan Copper is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 21% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Hindustan Copper is utilizing 80% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 14%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Hindustan Copper has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

What We Can Learn From Hindustan Copper's ROCE

To the delight of most shareholders, Hindustan Copper has now broken into profitability. And a remarkable 627% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

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

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.