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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at G Mining Ventures (TSE:GMIN) 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 G Mining Ventures is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.011 = US$15m ÷ (US$1.5b - US$166m) (Based on the trailing twelve months to September 2024).
Therefore, G Mining Ventures has an ROCE of 1.1%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 3.4%.
See our latest analysis for G Mining Ventures
In the above chart we have measured G Mining Ventures' 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 G Mining Ventures .
So How Is G Mining Ventures' ROCE Trending?
The fact that G Mining Ventures is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 1.1% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, G Mining Ventures is utilizing 235,897% 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.
What We Can Learn From G Mining Ventures' ROCE
In summary, it's great to see that G Mining Ventures has managed to break into profitability and is continuing to reinvest in its business. 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.
Like most companies, G Mining Ventures does come with some risks, and we've found 2 warning signs that you should be aware of.