Atalaya Mining ( LON:ATYM ) will want to turn around its return trends

Finding a company that has the potential to grow significantly is not easy, but it is possible if we look at some key financial metrics. Typically, we want to observe the growth trend He comes back On capital employed (ROCE) and besides, expansion a base of capital used. This essentially means that the company has profitable initiatives that it can continue to reinvest in, which is a characteristic of a compound machine. In light of this, when we looked at… Atalaya Mining (Color: atem) and its ROCE trend, we’re not exactly thrilled.

For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (its return), compared to the capital employed by the company. Analysts use this formula to calculate it at Atalaya Mining:

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

0.043 = €24 million ÷ (€653 million – €103 million) (Based on the trailing twelve months to September 2024).

So, Atalaya Mining has a return on equity of 4.3%. In absolute terms, this is a low return and is also lower than the metals and mining industry’s average performance of 8.6%.

View our latest analysis for Atalaya Mining

You can see above how Atalaya Mining’s current return on equity (ROCE) compares to its past returns on equity, but there’s only so much you can tell from the past. If you want to know what analysts are forecasting in the future, you should check out our website Free analyst report for Atalaya Mining .

In terms of Atalaya Mining’s historical ROCE movements, the trend is not great. To be more specific, return on equity has fallen from 10% over the past five years. Meanwhile, the company is using more capital but this hasn’t moved the needle much in terms of sales over the past 12 months, so this may reflect longer-term investments. It’s worth keeping an eye on the company’s earnings going forward to see if these investments ultimately contribute to the bottom line.

Taking it all together, while we are somewhat encouraged that Atalaya Mining is reinvesting in its own business, we recognize that the returns are shrinking. However, for long-term shareholders, the stock has given them an impressive 114% return in the last five years, so the market looks rosy about its future. But if these fundamental trends continue, we think the likelihood of it being multi-purpose from here is not high.

However, Atalaya Mining faces some risks, and we have spotted that 1 warning sign for atalaya mining company Which you might be interested in.

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