Stock Analysis

Returns on Capital Paint A Bright Future For Warrior Met Coal (NYSE:HCC)

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NYSE:HCC
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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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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, the ROCE of Warrior Met Coal (NYSE:HCC) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Warrior Met Coal, this is the formula:

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

0.47 = US$822m ÷ (US$1.9b - US$144m) (Based on the trailing twelve months to June 2022).

Therefore, Warrior Met Coal has an ROCE of 47%. That's a fantastic return and not only that, it outpaces the average of 21% earned by companies in a similar industry.

View our latest analysis for Warrior Met Coal

roce
NYSE:HCC Return on Capital Employed August 31st 2022

Above you can see how the current ROCE for Warrior Met Coal compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Warrior Met Coal's ROCE Trending?

Warrior Met Coal is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 47%. The amount of capital employed has increased too, by 89%. So we're very much inspired by what we're seeing at Warrior Met Coal thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that Warrior Met Coal is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 1 warning sign for Warrior Met Coal that we think you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Warrior Met Coal is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NYSE:HCC

Warrior Met Coal

Warrior Met Coal, Inc. produces and exports non-thermal metallurgical coal for the steel industry.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth0
Past Performance3
Financial Health5
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet and fair value.