Newmont's Return on Capital Employed Rises to 16% Amid Growing Capital Investment.

Newmont's (NYSE:NEM) returns on capital employed have increased to 16% over the last five years, with the company reinvesting profits at increasing rates of return. This is a positive trend for the business and could lead to further growth. Investors may not be fully aware of the promising trends yet, which could lead to further growth in the long term. However, there are also some risks associated with the company.

Newmont Mining Corp. (NYSE:NEM), the world's largest gold mining company, has seen its returns on capital employed (ROCE) increase to 16% over the last five years. This positive trend, driven by reinvestments at increasing rates of return, is a promising indicator for the company's future growth. However, investors should also be aware of the strategic risks and market conditions that could impact Newmont's performance.

Increased Capital Employed Returns

Newmont's ROCE has been steadily rising, indicating improved operational efficiency and profitability. This trend suggests that the company is effectively deploying its capital to generate higher returns. The company's strategic initiatives, such as portfolio diversification and cost reduction measures, have contributed to this positive trend [1].

Market Conditions and Analyst Sentiment

Despite the positive ROCE trend, market conditions and analyst sentiment pose potential risks. Macquarie recently downgraded Newmont from "Outperform" to "Neutral," citing overvaluation and recent outperformance [1]. Goldman Sachs also downgraded Newmont to "Neutral," noting overvaluation and operational risks in a volatile market [3]. These downgrades reflect concerns about Newmont's stock price and its ability to maintain its recent performance.

Cost Reduction Measures

Newmont has been implementing significant cost-cutting measures following its $15 billion acquisition of Newcrest Mining Ltd. The company aims to reduce its cost per ounce of gold by $300, aligning its cost structure with industry peers [2]. This strategy involves layoffs and other cost-cutting measures to bolster financial health. However, the company's aggressive cost-reduction plan could lead to short-term operational challenges and potential job losses [2].

Shareholder Returns and Valuation

Newmont has maintained a strong balance sheet, with $6.2 billion in cash and a net debt-to-EBITDA ratio of 0.34x as of Q2 2025 [3]. The company has also committed to returning capital to shareholders through dividends and share repurchases, with a total authorization of $6 billion [3]. Despite these positive financial metrics, Newmont's valuation remains relatively undervalued compared to its peers, with a forward P/E of 11.5 and an EV/EBITDA ratio of 5.9 [3].

Conclusion

Newmont's rising ROCE and strategic initiatives present promising opportunities for long-term growth. However, investors should be mindful of the risks associated with market conditions, analyst sentiment, and the company's aggressive cost-reduction plan. As Newmont continues to navigate these challenges, its ability to execute its strategic priorities and maintain operational efficiency will be crucial for sustained performance.

References:
[1] https://www.investing.com/news/analyst-ratings/macquarie-downgrades-newmont-stock-to-neutral-on-recent-outperformance-93CH-4218608
[2] https://www.ainvest.com/news/newmont-cut-costs-300-ounce-thousands-jobs-risk-2508/
[3] https://www.ainvest.com/news/goldman-sachs-downgrades-newmont-buying-opportunity-bear-market-2508/