What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Yancoal Australia's (ASX:YAL) returns on capital, so let's have a look.

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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. Analysts use this formula to calculate it for Yancoal Australia:

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

0.12 = AU$1.3b ÷ (AU$12b - AU$1.2b) (Based on the trailing twelve months to June 2025).

So, Yancoal Australia has an ROCE of 12%.  In absolute terms, that's a satisfactory return, but compared to the Oil and Gas industry average of 5.3% it's much better.

View our latest analysis for Yancoal Australia ASX:YAL Return on Capital Employed October 9th 2025

In the above chart we have measured Yancoal Australia's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Yancoal Australia .

So How Is Yancoal Australia's ROCE Trending?

Yancoal Australia's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 196% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Key Takeaway

To sum it up, Yancoal Australia is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 373% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Yancoal Australia can keep these trends up, it could have a bright future ahead.

Story Continues

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for YAL on our platform that is definitely worth checking out.

For those who like to invest in solid companies, check out this freelist of companies with solid balance sheets and high 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.

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