Shareholders Should Look Hard At Kenmare Resources plc’s (LON:KMR) 5.9%Return On Capital
Today we'll look at Kenmare Resources plc (LON:KMR) and reflect on its potential as an investment. Specifically, we'll consider its Return On Capital Employed (ROCE), since that will give us an insight into how efficiently the business can generate profits from the capital it requires.
First, we'll go over how we calculate ROCE. Second, we'll look at its ROCE compared to similar companies. And finally, we'll look at how its current liabilities are impacting its ROCE.
Understanding Return On Capital Employed (ROCE)
ROCE measures the 'return' (pre-tax profit) a company generates from capital employed in its business. All else being equal, a better business will have a higher ROCE. Ultimately, it is a useful but imperfect metric. Renowned investment researcher Michael Mauboussin has suggested that a high ROCE can indicate that 'one dollar invested in the company generates value of more than one dollar'.
So, How Do We Calculate ROCE?
Analysts use this formula to calculate return on capital employed:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
Or for Kenmare Resources:
0.059 = US$56m ÷ (US$1.0b - US$53m) (Based on the trailing twelve months to June 2019.)
So, Kenmare Resources has an ROCE of 5.9%.
See our latest analysis for Kenmare Resources
Is Kenmare Resources's ROCE Good?
When making comparisons between similar businesses, investors may find ROCE useful. Using our data, Kenmare Resources's ROCE appears to be significantly below the 13% average in the Metals and Mining industry. This performance is not ideal, as it suggests the company may not be deploying its capital as effectively as some competitors. Aside from the industry comparison, Kenmare Resources's ROCE is mediocre in absolute terms, considering the risk of investing in stocks versus the safety of a bank account. Investors may wish to consider higher-performing investments.
Kenmare Resources has an ROCE of 5.9%, but it didn't have an ROCE 3 years ago, since it was unprofitable. That suggests the business has returned to profitability. You can see in the image below how Kenmare Resources's ROCE compares to its industry. Click to see more on past growth.
LSE:KMR Past Revenue and Net Income, January 27th 2020
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When considering this metric, keep in mind that it is backwards looking, and not necessarily predictive. Companies in cyclical industries can be difficult to understand using ROCE, as returns typically look high during boom times, and low during busts. ROCE is, after all, simply a snap shot of a single year. Given the industry it operates in, Kenmare Resources could be considered cyclical. Since the future is so important for investors, you should check out our free report on analyst forecasts for Kenmare Resources.
How Kenmare Resources's Current Liabilities Impact Its ROCE
Current liabilities are short term bills and invoices that need to be paid in 12 months or less. The ROCE equation subtracts current liabilities from capital employed, so a company with a lot of current liabilities appears to have less capital employed, and a higher ROCE than otherwise. To counter this, investors can check if a company has high current liabilities relative to total assets.
Kenmare Resources has total assets of US$1.0b and current liabilities of US$53m. Therefore its current liabilities are equivalent to approximately 5.2% of its total assets. Kenmare Resources has a low level of current liabilities, which have a minimal impact on its uninspiring ROCE.
Story continues
The Bottom Line On Kenmare Resources's ROCE
Kenmare Resources looks like an ok business, but on this analysis it is not at the top of our buy list. You might be able to find a better investment than Kenmare Resources. If you want a selection of possible winners, check out this free list of interesting companies that trade on a P/E below 20 (but have proven they can grow earnings).
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
Cloud Storage Market 2018-2028 Technological Analysis by Up-gradation, Leading Companies, Demand And Revenue Analysis
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COMTEX_361094645/2606/2020-01-27T03:16:52
Cloud Robotics Market Analysis by Top Companies | Google, Amazon, IBM, CloudMinds, Rapyuta Robotics
Jan 27, 2020 (Market Insight Reports via COMTEX) -- New Jersey, United States, - The report on the Cloud Robotics Market is a compilation of intelligent, broad research studies that will help players and stakeholders to make informed business decisions in future. It offers specific and reliable recommendations for players to better tackle challenges in the Cloud Robotics Market. Furthermore, it comes out as a powerful resource providing up to date and verified information and data on various aspects of the Cloud Robotics Market. Readers will be able to gain deeper understanding of the competitive landscape and its future scenarios, crucial dynamics, and leading segments of the Cloud Robotics Market. Buyers of the report will have access to accurate PESTLE, SWOT, and other types of analysis on the Cloud Robotics Market.
Cloud Robotics Market was valued at USD 2.65 Billion in 2018 and is projected to reach USD 16.9 Billion by 2026, growing at a CAGR of 25.9% from 2019 to 2026.
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Top 10 Companies in the Global Cloud Robotics Market Research Report:
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Table of Content
1 Introduction of Cloud Robotics Market
1.1 Overview of the Market1.2 Scope of Report1.3 Assumptions
2 Executive Summary
3 Research Methodology of Verified Market Research
3.1 Data Mining3.2 Validation3.3 Primary Interviews3.4 List of Data Sources
4 Cloud Robotics Market Outlook
4.1 Overview4.2 Market Dynamics4.2.1 Drivers4.2.2 Restraints4.2.3 Opportunities4.3 Porters Five Force Model4.4 Value Chain Analysis
5 Cloud Robotics Market, By Deployment Model
5.1 Overview
6 Cloud Robotics Market, By Solution
6.1 Overview
7 Cloud Robotics Market, By Vertical
7.1 Overview
8 Cloud Robotics Market, By Geography
8.1 Overview8.2 North America8.2.1 U.S.8.2.2 Canada8.2.3 Mexico8.3 Europe8.3.1 Germany8.3.2 U.K.8.3.3 France8.3.4 Rest of Europe8.4 Asia Pacific8.4.1 China8.4.2 Japan8.4.3 India8.4.4 Rest of Asia Pacific8.5 Rest of the World8.5.1 Latin America8.5.2 Middle East
9 Cloud Robotics Market Competitive Landscape
9.1 Overview9.2 Company Market Ranking9.3 Key Development Strategies
10 Company Profiles
10.1.1 Overview10.1.2 Financial Performance10.1.3 Product Outlook10.1.4 Key Developments
11 Appendix
11.1 Related Research
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Highlights of Report
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Verified market research partners with clients to provide insight into strategic and growth analytics; data that help achieve business goals and targets. Our core values include trust, integrity, and authenticity for our clients.
Analysts with high expertise in data gathering and governance utilize industry techniques to collate and examine data at all stages. Our analysts are trained to combine modern data collection techniques, superior research methodology, subject expertise and years of collective experience to produce informative and accurate research reports.
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COMTEX_361104207/2599/2020-01-27T07:13:00
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