Buryatzoloto (MCX:BRZL) Hasn't Managed To Accelerate Its Returns

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Buryatzoloto (MCX:BRZL), we don't think it's current trends fit the mold of a multi-bagger.

What is 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. To calculate this metric for Buryatzoloto, this is the formula:

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

0.17 = ₽3.1b ÷ (₽19b - ₽756m) (Based on the trailing twelve months to June 2021).

Therefore, Buryatzoloto has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 11% generated by the Metals and Mining industry.

View our latest analysis for Buryatzoloto

Historical performance is a great place to start when researching a stock so above you can see the gauge for Buryatzoloto's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Buryatzoloto, check out these free graphs here.

So How Is Buryatzoloto's ROCE Trending?

Things have been pretty stable at Buryatzoloto, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Buryatzoloto doesn't end up being a multi-bagger in a few years time.

The Bottom Line

In summary, Buryatzoloto isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors appear hesitant that the trends will pick up because the stock has fallen 15% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Like most companies, Buryatzoloto does come with some risks, and we've found 1 warning sign that you should be aware of.

While Buryatzoloto may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.
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