Yahoo Finance The Return Trends At Horizon Copper (CVE:HCU) Look Promising
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Horizon Copper (CVE:HCU) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Horizon Copper:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.00016 = US$81k ÷ (US$525m - US$11m) (Based on the trailing twelve months to September 2023).
Therefore, Horizon Copper has an ROCE of 0.02%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 2.9%.
View our latest analysis for Horizon Copper
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'd like to look at how Horizon Copper has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
What The Trend Of ROCE Can Tell Us
We're delighted to see that Horizon Copper is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 0.02% on its capital. And unsurprisingly, like most companies trying to break into the black, Horizon Copper is utilizing 6,506% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.
What We Can Learn From Horizon Copper's ROCE
Long story short, we're delighted to see that Horizon Copper's reinvestment activities have paid off and the company is now profitable. And a remarkable 520% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
One more thing: We've identified 4 warning signs with Horizon Copper (at least 1 which is significant) , and understanding them would certainly be useful.
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.
