If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So when we looked at Compañía de Minas BuenaventuraA (NYSE:BVN) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

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. The formula for this calculation on Compañía de Minas BuenaventuraA is:

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

0.0046 = US$17m ÷ (US$4.0b - US$332m) (Based on the trailing twelve months to March 2021).

So, Compañía de Minas BuenaventuraA has an ROCE of 0.5%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 11%.

See our latest analysis for Compañía de Minas BuenaventuraA

Above you can see how the current ROCE for Compañía de Minas BuenaventuraA 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.

What Does the ROCE Trend For Compañía de Minas BuenaventuraA Tell Us?

We're delighted to see that Compañía de Minas BuenaventuraA is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 0.5% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

The Bottom Line On Compañía de Minas BuenaventuraA's ROCE

To bring it all together, Compañía de Minas BuenaventuraA has done well to increase the returns it's generating from its capital employed. Given the stock has declined 24% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.