Yahoo Finance Investors Will Want Taseko Mines' (TSE:TKO) Growth In ROCE To Persist
There are a few key trends to look for if we want to identify the next multi-bagger. 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, Taseko Mines (TSE:TKO) looks quite promising in regards to its trends of return on capital.
Understanding 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. Analysts use this formula to calculate it for Taseko Mines:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0048 = CA$4.0m ÷ (CA$910m - CA$78m) (Based on the trailing twelve months to December 2020).
Thus, Taseko Mines has an ROCE of 0.5%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 1.6%.
Check out our latest analysis for Taseko Mines
Above you can see how the current ROCE for Taseko Mines 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 Taseko Mines.
What The Trend Of ROCE Can Tell Us
Taseko Mines has broken into the black (profitability) and we're sure it's a sight for sore eyes. 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. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. Because in the end, a business can only get so efficient.
Our Take On Taseko Mines' ROCE
To sum it up, Taseko Mines is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 232% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Taseko Mines can keep these trends up, it could have a bright future ahead.
One more thing, we've spotted 3 warning signs facing Taseko Mines that you might find interesting.
While Taseko Mines isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
