There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at the ROCE trend of Capricorn Metals (ASX:CMM) we really liked what we saw.

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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. To calculate this metric for Capricorn Metals, this is the formula:

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

0.24 = AU$225m ÷ (AU$1.0b - AU$86m) (Based on the trailing twelve months to June 2025).

Thus, Capricorn Metals has an ROCE of 24%.  In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 9.2%.

View our latest analysis for Capricorn Metals ASX:CMM Return on Capital Employed November 12th 2025

In the above chart we have measured Capricorn Metals' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Capricorn Metals .

The Trend Of ROCE

The fact that Capricorn Metals is now generating some pre-tax profits from its prior investments is very encouraging. 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. And unsurprisingly, like most companies trying to break into the black, Capricorn Metals is utilizing 758% more capital than it was five years ago. 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.

In Conclusion...

In summary, it's great to see that Capricorn Metals has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a staggering 748% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Capricorn Metals can keep these trends up, it could have a bright future ahead.

Story Continues

While Capricorn Metals looks impressive, no company is worth an infinite price. The  intrinsic value infographic for CMM helps visualize whether it is currently trading for a fair price.

If you want to search for more stocks that have been earning high returns, check out this freelist 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.

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