TSE:BTO) we really liked what we saw.” data-reactid=”28″ type=”text”>Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we’ll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company’s amount of capital employed. Ultimately, this demonstrates that it’s a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of B2Gold (TSE:BTO) we really liked what we saw.
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 B2Gold is:
(Based on the trailing twelve months to June 2020).” data-reactid=”36″ type=”text”>0.24 = US$709m ÷ (US$3.2b – US$266m) (Based on the trailing twelve months to June 2020).
report on analyst forecasts for the company.” data-reactid=”51″ type=”text”>In the above chart we have measured B2Gold’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 report on analyst forecasts for the company.
What Does the ROCE Trend For B2Gold Tell Us?
We’re delighted to see that B2Gold 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 24% on its capital. Not only that, but the company is utilizing 50% more capital than before, but that’s to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.
What We Can Learn From B2Gold’s ROCE
Overall, B2Gold gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Since the stock has returned a staggering 423% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.
4 warning signs (and 1 which can’t be ignored) we think you should know about.” data-reactid=”56″ type=”text”>B2Gold does have some risks, we noticed 4 warning signs (and 1 which can’t be ignored) we think you should know about.
stocks earning high returns on equity with solid balance sheets.” data-reactid=”57″ type=”text”>High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.
This article by Simply Wall St is general in nature. 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.