Stock Analysis

Sibanye Stillwater (JSE:SSW) Might Have The Makings Of A Multi-Bagger

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JSE:SSW
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What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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, Sibanye Stillwater (JSE:SSW) looks quite promising in regards to its trends of return on capital.

What Is 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. Analysts use this formula to calculate it for Sibanye Stillwater:

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

0.14 = R23b ÷ (R180b - R18b) (Based on the trailing twelve months to June 2023).

So, Sibanye Stillwater has an ROCE of 14%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Metals and Mining industry average of 17%.

See our latest analysis for Sibanye Stillwater

roce
JSE:SSW Return on Capital Employed December 9th 2023

Above you can see how the current ROCE for Sibanye Stillwater compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Sibanye Stillwater.

The Trend Of ROCE

We like the trends that we're seeing from Sibanye Stillwater. The data shows that returns on capital have increased substantially over the last five years to 14%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 121%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Sibanye Stillwater's ROCE

To sum it up, Sibanye Stillwater has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 171% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Sibanye Stillwater we've found 3 warning signs (1 shouldn't be ignored!) that you should be aware of before investing here.

While Sibanye Stillwater may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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

Find out whether Sibanye Stillwater 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.

View the Free Analysis

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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.