Starcore International Mines' (TSE:SAM) Returns On Capital Tell Us There Is Reason To Feel Uneasy

When it comes to investing, there are some useful financial metrics that can warn us when a business is potentially in trouble. Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. This indicates the company is producing less profit from its investments and its total assets are decreasing. In light of that, from a first glance at Starcore International Mines (TSE:SAM), we've spotted some signs that it could be struggling, so let's investigate.

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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. The formula for this calculation on Starcore International Mines is:

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

0.0049 = CA$268k ÷ (CA$64m - CA$9.6m) (Based on the trailing twelve months to October 2025).

So, Starcore International Mines has an ROCE of 0.5%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 4.5%.

Check out our latest analysis for Starcore International Mines

Historical performance is a great place to start when researching a stock so above you can see the gauge for Starcore International Mines' ROCE against it's prior returns. If you're interested in investigating Starcore International Mines' past further, check out this free graph covering Starcore International Mines' past earnings, revenue and cash flow.

So How Is Starcore International Mines' ROCE Trending?

We are a bit worried about the trend of returns on capital at Starcore International Mines. About five years ago, returns on capital were 10%, however they're now substantially lower than that as we saw above. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Companies that exhibit these attributes tend to not be shrinking, but they can be mature and facing pressure on their margins from competition. If these trends continue, we wouldn't expect Starcore International Mines to turn into a multi-bagger.

What We Can Learn From Starcore International Mines' ROCE

In summary, it's unfortunate that Starcore International Mines is generating lower returns from the same amount of capital. The market must be rosy on the stock's future because even though the underlying trends aren't too encouraging, the stock has soared 213%. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

If you want to know some of the risks facing Starcore International Mines we've found 5 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.