Investors Met With Slowing Returns on Capital At Central Asia Metals (LON:CAML)
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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. To calculate this metric for Central Asia Metals, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = US$69m ÷ (US$440m - US$28m) (Based on the trailing twelve months to December 2024).
Therefore, Central Asia Metals has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Metals and Mining industry average of 11% it's much better.
View our latest analysis for Central Asia Metals
In the above chart we have measured Central Asia Metals' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Central Asia Metals for free.
There hasn't been much to report for Central Asia Metals' returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Central Asia Metals to be a multi-bagger going forward. That probably explains why Central Asia Metals has been paying out 87% of its earnings as dividends to shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.
In summary, Central Asia Metals isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And with the stock having returned a mere 39% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
If you want to know some of the risks facing Central Asia Metals we've found 2 warning signs (1 is significant!) that you should be aware of before investing here.
While Central Asia Metals isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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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