Yahoo Finance Sibanye Stillwater (JSE:SSW) Could Become A Multi-Bagger
To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. With that in mind, the ROCE of Sibanye Stillwater (JSE:SSW) looks great, so lets see what the trend can tell us.
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. The formula for this calculation on Sibanye Stillwater is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.26 = R37b ÷ (R159b - R19b) (Based on the trailing twelve months to June 2022).
So, Sibanye Stillwater has an ROCE of 26%. In absolute terms that's a very respectable return and compared to the Metals and Mining industry average of 24% it's pretty much on par.
Check out our latest analysis for Sibanye Stillwater
Above you can see how the current ROCE for Sibanye Stillwater 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 The Trend Of ROCE Can Tell Us
The trends we've noticed at Sibanye Stillwater are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 26%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 106%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.
The Key Takeaway
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Sibanye Stillwater has. Since the stock has returned a staggering 185% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Sibanye Stillwater can keep these trends up, it could have a bright future ahead.
If you'd like to know about the risks facing Sibanye Stillwater, we've discovered 2 warning signs that you should be aware of.
If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.
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