Returns On Capital Are A Standout For Jura Energy (CVE:JEC)

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Jura Energy's (CVE:JEC) look very promising so lets take a look.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Jura Energy:

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

0.21 = US$8.5m ÷ (US$64m - US$24m) (Based on the trailing twelve months to June 2021).

Therefore, Jura Energy has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 6.5% earned by companies in a similar industry.

View our latest analysis for Jura Energy

Historical performance is a great place to start when researching a stock so above you can see the gauge for Jura Energy's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Jura Energy, check out these free graphs here.

So How Is Jura Energy's ROCE Trending?

The fact that Jura Energy is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 21% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Jura Energy is utilizing 91% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 37%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Jura Energy has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line

Overall, Jura Energy gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Since the stock has returned a staggering 200% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 2 warning signs facing Jura Energy that you might find interesting.

Jura Energy is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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.

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