Stock Analysis\n\nIf you're looking at a mature business that's past the growth phase, what are some of the underlying trends that pop up? When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. Having said that, after a brief look, Intrepid Potash (NYSE:IPI) we aren't filled with optimism, but let's investigate further. \n\nUnderstanding Return On Capital Employed (ROCE) \n\nFor 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. To calculate this metric for Intrepid Potash, this is the formula: \n\nReturn on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) \n\n0.01 = US$5.7m ÷ (US$601m - US$38m) (Based on the trailing twelve months to March 2025).\n\nThus, Intrepid Potash has an ROCE of 1.0%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 10%. \n\nAbove you can see how the current ROCE for Intrepid Potash compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Intrepid Potash. \n\nWhat Can We Tell From Intrepid Potash's ROCE Trend? \n\nWe are a bit worried about the trend of returns on capital at Intrepid Potash. To be more specific, the ROCE was 2.2% five years ago, but since then it has dropped noticeably. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Intrepid Potash becoming one if things continue as they have. \n\nThe Bottom Line On Intrepid Potash's ROCE \n\nAll in all, the lower returns from the same amount of capital employed aren't exactly signs of a compounding machine. Since the stock has skyrocketed 303% over the last five years, it looks like investors have high expectations of the stock. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now. \n\nLike most companies, Intrepid Potash does come with some risks, and we've found 1 warning sign that you should be aware of. \n\nWhile Intrepid Potash may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.\n\nAbout NYSE:IPI\n\nIntrepid Potash, Inc. delivers potassium, magnesium, sulfur, salt, and water products.

Intrepid Potash (NYSE:IPI) May Have Issues Allocating Its Capital

The article analyzes Intrepid Potash's declining Return on Capital Employed (ROCE) of 1.0%, which underperforms the Chemicals industry average of 10%. Over five years, ROCE has dropped from 2.2% to 1.0%, with capital employed remaining stable, suggesting a mature business with limited growth. Despite a 303% stock increase over five years, the company's fundamentals are deemed weak, and investors are advised to be cautious.