If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 when we looked at Compañía de Minas BuenaventuraA (NYSE:BVN) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Compañía de Minas BuenaventuraA is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.043 = US$196m ÷ (US$5.0b - US$444m) (Based on the trailing twelve months to September 2024).

So, Compañía de Minas BuenaventuraA has an ROCE of 4.3%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 10%.

Check out our latest analysis for Compañía de Minas BuenaventuraA

In the above chart we have measured Compañía de Minas BuenaventuraA's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Compañía de Minas BuenaventuraA .

What The Trend Of ROCE Can Tell Us

We're delighted to see that Compañía de Minas BuenaventuraA is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 4.3% which is a sight for sore eyes. In addition to that, Compañía de Minas BuenaventuraA is employing 20% more capital than previously which is expected of a company that's trying to break into profitability. 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.

The Bottom Line On Compañía de Minas BuenaventuraA's ROCE

To the delight of most shareholders, Compañía de Minas BuenaventuraA has now broken into profitability. Since the stock has only returned 1.8% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you'd like to know more about Compañía de Minas BuenaventuraA, we've spotted 2 warning signs, and 1 of them is a bit unpleasant.

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.