資本回報為Warrior Met Coal(紐約證券交易所代碼：HCC)描繪了光明的未來

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, the ROCE of Warrior Met Coal (NYSE:HCC) looks great, so lets see what the trend can tell us.

Return On Capital Employed (ROCE): What is it?

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. To calculate this metric for Warrior Met Coal, this is the formula:

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

0.30 = US$448m ÷ (US$1.6b - US$156m) (Based on the trailing twelve months to March 2022).

Therefore, Warrior Met Coal has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 20%.

See our latest analysis for Warrior Met Coal

In the above chart we have measured Warrior Met Coal's 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 Warrior Met Coal here for free.

What Does the ROCE Trend For Warrior Met Coal Tell Us?

Investors would be pleased with what's happening at Warrior Met Coal. The data shows that returns on capital have increased substantially over the last five years to 30%. The amount of capital employed has increased too, by 86%. So we're very much inspired by what we're seeing at Warrior Met Coal thanks to its ability to profitably reinvest capital.

The Bottom Line On Warrior Met Coal's ROCE

All in all, it's terrific to see that Warrior Met Coal is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 322% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Warrior Met Coal does have some risks, we noticed 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.