Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Korshynov Mining Plant (MCX:KOGK) looks quite promising in regards to its trends of return on capital.
Understanding Return On Capital Employed (ROCE)
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. Analysts use this formula to calculate it for Korshynov Mining Plant:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0055 = ₽240m ÷ (₽47b - ₽3.1b) (Based on the trailing twelve months to September 2020).
Therefore, Korshynov Mining Plant has an ROCE of 0.5%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 7.6%.
Historical performance is a great place to start when researching a stock so above you can see the gauge for Korshynov Mining Plant's ROCE against it's prior returns. If you'd like to look at how Korshynov Mining Plant has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
So How Is Korshynov Mining Plant's ROCE Trending?
Korshynov Mining Plant has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 0.5% which is a sight for sore eyes. In addition to that, Korshynov Mining Plant is employing 57% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
What We Can Learn From Korshynov Mining Plant's ROCE
To the delight of most shareholders, Korshynov Mining Plant has now broken into profitability. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 22% to shareholders. So with that in mind, we think the stock deserves further research.
On a final note, we've found 1 warning sign for Korshynov Mining Plant that we think you should be aware of.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
If you decide to trade Korshynov Mining Plant, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.