Adyton Resources (CVE:ADY) Hasn't Managed To Accelerate Its Returns

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. However, after briefly looking over the numbers, we don't think Adyton Resources (CVE:ADY) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. To calculate this metric for Adyton Resources, this is the formula:

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

0.18 = CA$2.7m ÷ (CA$16m - CA$748k) (Based on the trailing twelve months to December 2021).

So, Adyton Resources has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 2.4% generated by the Metals and Mining industry.

See our latest analysis for Adyton Resources

roce

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Adyton Resources' past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Adyton Resources' ROCE Trending?

There hasn't been much to report for Adyton Resources' returns and its level of capital employed because both metrics have been steady for the past . This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Adyton Resources doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

We can conclude that in regards to Adyton Resources' returns on capital employed and the trends, there isn't much change to report on. Moreover, since the stock has crumbled 82% over the last year, it appears investors are expecting the worst. Therefore based on the analysis done in this article, we don't think Adyton Resources has the makings of a multi-bagger.

If you want to know some of the risks facing Adyton Resources we've found 2 warning signs (1 is potentially serious!) that you should be aware of before investing here.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.