Why The 30% Return On Capital At Ashinskiy metallurgical works (MCX:AMEZ) Should Have Your Attention

By
Simply Wall St
Published
January 26, 2022
MISX:AMEZ
Source: Shutterstock

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 Ashinskiy metallurgical works' (MCX:AMEZ) look very promising so lets take a look.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Ashinskiy metallurgical works:

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

0.30 = ₽4.7b ÷ (₽21b - ₽5.4b) (Based on the trailing twelve months to June 2021).

Therefore, Ashinskiy metallurgical works has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 14%.

Check out our latest analysis for Ashinskiy metallurgical works

roce
MISX:AMEZ Return on Capital Employed January 26th 2022

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

What Does the ROCE Trend For Ashinskiy metallurgical works Tell Us?

We like the trends that we're seeing from Ashinskiy metallurgical works. The data shows that returns on capital have increased substantially over the last five years to 30%. The amount of capital employed has increased too, by 32%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Ashinskiy metallurgical works' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Ashinskiy metallurgical works has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 2 warning signs for Ashinskiy metallurgical works you'll probably want to know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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