Sylvania Platinum (LON:SLP) Is Reinvesting At Lower Rates Of Return

editorial-team@simplywallst.com (Simply Wall St)

Thu, May 8, 2025, 10:20 PM 3 min read

If we privation to find a banal that could multiply implicit the agelong term, what are the underlying trends we should look for? Firstly, we'd privation to place a increasing return connected superior employed (ROCE) and past alongside that, an ever-increasing base of superior employed. Basically this means that a institution has profitable initiatives that it tin proceed to reinvest in, which is simply a trait of a compounding machine. However, aft investigating Sylvania Platinum (LON:SLP), we don't deliberation it's existent trends acceptable the mold of a multi-bagger.

Our escaped banal study includes 1 informing motion investors should beryllium alert of earlier investing successful Sylvania Platinum. Read for escaped now.

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a institution generates from superior employed successful its business. To cipher this metric for Sylvania Platinum, this is the formula:

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

0.036 = US$8.8m ÷ (US$259m - US$15m) (Based connected the trailing 12 months to December 2024).

Therefore, Sylvania Platinum has an ROCE of 3.6%. In implicit terms, that's a debased instrumentality and it besides under-performs the Metals and Mining manufacture mean of 7.0%.

Check retired our latest investigation for Sylvania Platinum

Above you tin spot however the existent ROCE for Sylvania Platinum compares to its anterior returns connected capital, but there's lone truthful overmuch you tin archer from the past. If you'd like, you tin check retired the forecasts from the analysts covering Sylvania Platinum for free.

When we looked astatine the ROCE inclination astatine Sylvania Platinum, we didn't summation overmuch confidence. Over the past 5 years, returns connected superior person decreased to 3.6% from 29% 5 years ago. However it looks similar Sylvania Platinum mightiness beryllium reinvesting for agelong word maturation due to the fact that portion superior employed has increased, the company's income haven't changed overmuch successful the past 12 months. It's worthy keeping an oculus connected the company's net from present connected to spot if these investments bash extremity up contributing to the bottommost line.

Bringing it each together, portion we're somewhat encouraged by Sylvania Platinum's reinvestment successful its ain business, we're alert that returns are shrinking. Since the banal has gained an awesome 57% implicit the past 5 years, investors indispensable deliberation there's amended things to come. But if the trajectory of these underlying trends continue, we deliberation the likelihood of it being a multi-bagger from present isn't high.