Zhaojin Mining Industry (HKG:1818) Is Experiencing Growth In Returns On Capital
Zhaojin Mining Industry (HKG:1818) has shown growth in returns on capital, increasing to 9.5% over the last five years, despite being below the industry average of 12%. The company has increased its capital employed by 53%, leading to a 195% return to shareholders. This growth indicates promising fundamentals, warranting further due diligence. Investors are recognizing these changes, and the company is seen as a compounding machine reinvesting its earnings profitably.
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Zhaojin Mining Industry's (HKG:1818) returns on capital, so let's have a look.
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What Is 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. To calculate this metric for Zhaojin Mining Industry, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.095 = CN¥3.9b ÷ (CN¥58b - CN¥17b) (Based on the trailing twelve months to September 2025).
Therefore, Zhaojin Mining Industry has an ROCE of 9.5%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 12%.
See our latest analysis for Zhaojin Mining Industry
In the above chart we have measured Zhaojin Mining Industry'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 Zhaojin Mining Industry .
What The Trend Of ROCE Can Tell Us
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 9.5%. The amount of capital employed has increased too, by 53%. So we're very much inspired by what we're seeing at Zhaojin Mining Industry thanks to its ability to profitably reinvest capital.
What We Can Learn From Zhaojin Mining Industry's ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Zhaojin Mining Industry has. Since the stock has returned a staggering 195% 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.
On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for 1818 on our platform that is definitely worth checking out.
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.
