Why The 22% Return On Capital At Sibanye Stillwater (JSE:SSW) Should Have Your Attention

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Sibanye Stillwater (JSE:SSW) we really liked what we saw.

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 Sibanye Stillwater, this is the formula:

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

0.22 = R32b ÷ (R167b - R20b) (Based on the trailing twelve months to December 2022).

So, Sibanye Stillwater has an ROCE of 22%. In absolute terms that's a very respectable return and compared to the Metals and Mining industry average of 20% it's pretty much on par.

Check out our latest analysis for Sibanye Stillwater

In the above chart we have measured Sibanye Stillwater'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 report on analyst forecasts for the company.

What Can We Tell From Sibanye Stillwater's ROCE Trend?

Sibanye Stillwater is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 22%. The amount of capital employed has increased too, by 116%. So we're very much inspired by what we're seeing at Sibanye Stillwater thanks to its ability to profitably reinvest capital.

What We Can Learn From Sibanye Stillwater's ROCE

All in all, it's terrific to see that Sibanye Stillwater is reaping the rewards from prior investments and is growing its capital base. And a remarkable 364% 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.

On a final note, we've found 2 warning signs for Sibanye Stillwater that we think you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.