Returns Are Gaining Momentum At Compañía de Minas BuenaventuraA (NYSE:BVN)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. 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)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Compañía de Minas BuenaventuraA:

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

0.023 = US$95m ÷ (US$4.6b - US$369m) (Based on the trailing twelve months to June 2024).

So, Compañía de Minas BuenaventuraA has an ROCE of 2.3%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 9.4%.

Check out 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'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Compañía de Minas BuenaventuraA .

What The Trend Of ROCE Can Tell Us

Shareholders will be relieved that Compañía de Minas BuenaventuraA has broken into profitability. The company now earns 2.3% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Compañía de Minas BuenaventuraA has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

In Conclusion...

As discussed above, Compañía de Minas BuenaventuraA appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

If you'd like to know about the risks facing Compañía de Minas BuenaventuraA, we've discovered 1 warning sign that 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.