The Return Trends At Korshynov Mining Plant (MCX:KOGK) Look Promising

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Korshynov Mining Plant (MCX:KOGK) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Korshynov Mining Plant is:

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

0.11 = ₽5.3b ÷ (₽52b - ₽2.8b) (Based on the trailing twelve months to June 2021).

So, Korshynov Mining Plant has an ROCE of 11%. In isolation, that's a pretty standard return but against the Metals and Mining industry average of 14%, it's not as good.

Check out our latest analysis for Korshynov Mining Plant

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 want to delve into the historical earnings, revenue and cash flow of Korshynov Mining Plant, check out these free graphs here.

What Does the ROCE Trend For Korshynov Mining Plant Tell Us?

The fact that Korshynov Mining Plant is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 11% on its capital. And unsurprisingly, like most companies trying to break into the black, Korshynov Mining Plant is utilizing 71% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Bottom Line

Overall, Korshynov Mining Plant gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Astute investors may have an opportunity here because the stock has declined 28% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing to note, we've identified 2 warning signs with Korshynov Mining Plant and understanding them should be part of your investment process.

While Korshynov Mining Plant isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.