Investors Will Want Mount Everest Gold Group's (HKG:1815) Growth In ROCE To Persist
What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Mount Everest Gold Group (HKG:1815) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
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. The formula for this calculation on Mount Everest Gold Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.042 = CN¥59m ÷ (CN¥1.8b - CN¥357m) (Based on the trailing twelve months to June 2025).
Thus, Mount Everest Gold Group has an ROCE of 4.2%. In absolute terms, that's a low return and it also under-performs the Specialty Retail industry average of 9.1%.
View our latest analysis for Mount Everest Gold Group
Historical performance is a great place to start when researching a stock so above you can see the gauge for Mount Everest Gold Group's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Mount Everest Gold Group.
What Can We Tell From Mount Everest Gold Group's ROCE Trend?
Shareholders will be relieved that Mount Everest Gold Group has broken into profitability. The company now earns 4.2% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Mount Everest Gold Group has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.
What We Can Learn From Mount Everest Gold Group's ROCE
In summary, we're delighted to see that Mount Everest Gold Group has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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.
On a separate note, we've found 1 warning sign for Mount Everest Gold Group you'll probably want to know about.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.