Compañía de Minas BuenaventuraA (NYSE:BVN) Shareholders Will Want The ROCE Trajectory To Continue

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Compañía de Minas BuenaventuraA (NYSE:BVN) so let's look a bit deeper.

What Is 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. The formula for this calculation on Compañía de Minas BuenaventuraA is:

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

0.098 = US$448m ÷ (US$5.0b - US$480m) (Based on the trailing twelve months to December 2024).

Therefore, Compañía de Minas BuenaventuraA has an ROCE of 9.8%. Even though it's in line with the industry average of 10%, it's still a low return by itself.

See our latest analysis for Compañía de Minas BuenaventuraA

In the above chart we have measured Compañía de Minas BuenaventuraA's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Compañía de Minas BuenaventuraA .

What The Trend Of ROCE Can Tell Us

The fact that Compañía de Minas BuenaventuraA is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 9.8% on its capital. And unsurprisingly, like most companies trying to break into the black, Compañía de Minas BuenaventuraA is utilizing 29% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On Compañía de Minas BuenaventuraA's ROCE

In summary, it's great to see that Compañía de Minas BuenaventuraA has managed to break into profitability and is continuing to reinvest in its business. Since the stock has only returned 19% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.

On a final note, we've found 1 warning sign for Compañía de Minas BuenaventuraA that we think you should be aware of.

While Compañía de Minas BuenaventuraA 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.