We Think Sandur Manganese & Iron Ores (NSE:SANDUMA) Might Have The DNA Of A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. And in light of that, the trends we're seeing at Sandur Manganese & Iron Ores' (NSE:SANDUMA) look very promising so lets take a look.

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

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. To calculate this metric for Sandur Manganese & Iron Ores, this is the formula:

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

0.23 = ₹6.0b ÷ (₹30b - ₹4.2b) (Based on the trailing twelve months to December 2024).

Thus, Sandur Manganese & Iron Ores has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 14%.

See our latest analysis for Sandur Manganese & Iron Ores

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

What Can We Tell From Sandur Manganese & Iron Ores' ROCE Trend?

Sandur Manganese & Iron Ores is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 23%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 149%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

To sum it up, Sandur Manganese & Iron Ores 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 solid 21% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Sandur Manganese & Iron Ores, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.