To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Admiralty Resources (ASX:ADY) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Admiralty Resources, this is the formula:

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

0.0095 = AU$175k ÷ (AU$23m – AU$4.6m) (Based on the trailing twelve months to June 2020).

Thus, Admiralty Resources has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 9.9%.

Check out our latest analysis for Admiralty Resources

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Admiralty Resources' past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Admiralty Resources' ROCE Trending?

Shareholders will be relieved that Admiralty Resources has broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 0.9%, which is always encouraging. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

The Key Takeaway

In summary, we're delighted to see that Admiralty Resources has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 16% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

Admiralty Resources does have some risks, we noticed 4 warning signs (and 2 which are concerning) we think you should know about.

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.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

Peter Schwann has been the CEO of Aruma Resources Limited (ASX:AAJ) since 2010, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Aruma Resources

Comparing Aruma Resources Limited's CEO Compensation With the industry

At the time of writing, our data shows that Aruma Resources Limited has a market capitalization of AU$11m, and reported total annual CEO compensation of AU$105k for the year to June 2020. Notably, that's a decrease of 52% over the year before. In particular, the salary of AU$95.8k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below AU$279m, reported a median total CEO compensation of AU$303k. Accordingly, Aruma Resources pays its CEO under the industry median. Moreover, Peter Schwann also holds AU$279k worth of Aruma Resources stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 69% of total compensation represents salary and 31% is other remuneration. Aruma Resources is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion – which is generally tied to performance, is lower.

A Look at Aruma Resources Limited's Growth Numbers

Aruma Resources Limited's earnings per share (EPS) grew 29% per year over the last three years. It achieved revenue growth of 22% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Aruma Resources Limited Been A Good Investment?

With a total shareholder return of 11% over three years, Aruma Resources Limited shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary…

As we touched on above, Aruma Resources Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But over the last three years, EPS growth has been growing rapidly, which is a great sign for the company. Unfortunately, although shareholder returns are growing, they haven't impressed us as much in comparison, over the same period. We would wish for better returns (whether dividends or capital gains) but we do admire the solidEPS growth on show here. So it's fair to say Peter has done quite well despite modest compensation and shareholders might not be averse to a raise.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 5 warning signs for Aruma Resources (4 shouldn't be ignored!) that you should be aware of before investing here.

Switching gears from Aruma Resources, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Viking Mines Limited (ASX:VKA).

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, rules govern insider transactions, and certain disclosures are required.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

See our latest analysis for Viking Mines

The Last 12 Months Of Insider Transactions At Viking Mines

Over the last year, we can see that the biggest insider purchase was by Executive Chairman of the Board Raymond Whitten for AU$309k worth of shares, at about AU$0.01 per share. Even though the purchase was made at a significantly lower price than the recent price (AU$0.016), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.

The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Viking Mines insiders own about AU$1.3m worth of shares. That equates to 26% of the company. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Does This Data Suggest About Viking Mines Insiders?

There haven't been any insider transactions in the last three months — that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Overall we don't see anything to make us think Viking Mines insiders are doubting the company, and they do own shares. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Be aware that Viking Mines is showing 4 warning signs in our investment analysis, and 2 of those shouldn't be ignored…

Of course Viking Mines may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

Rob Rutherford has been the CEO of Red Metal Limited (ASX:RDM) since 2003, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Red Metal.

Check out our latest analysis for Red Metal

Comparing Red Metal Limited's CEO Compensation With the industry

At the time of writing, our data shows that Red Metal Limited has a market capitalization of AU$27m, and reported total annual CEO compensation of AU$302k for the year to June 2020. That's a notable decrease of 26% on last year. Notably, the salary which is AU$230.0k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below AU$283m, we found that the median total CEO compensation was AU$309k. From this we gather that Rob Rutherford is paid around the median for CEOs in the industry. What's more, Rob Rutherford holds AU$1.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Red Metal pays out 76% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion – which is generally tied to performance, is lower.

A Look at Red Metal Limited's Growth Numbers

Over the past three years, Red Metal Limited has seen its earnings per share (EPS) grow by 62% per year. In the last year, its revenue is up 297%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Red Metal Limited Been A Good Investment?

Given the total shareholder loss of 36% over three years, many shareholders in Red Metal Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude…

As previously discussed, Rob is compensated close to the median for companies of its size, and which belong to the same industry. On the other hand, the company has logged negative shareholder returns over the previous three years. However, EPS growth is positive over the same time frame. Overall, we wouldn't say Rob is paid an unjustified compensation, but shareholders might not favor a raise before shareholder returns show a positive trend.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 5 warning signs for Red Metal (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.