Shareholders Would Enjoy A Repeat Of Jutal Offshore Oil Services' (HKG:3303) Recent Growth In Returns

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at the ROCE trend of Jutal Offshore Oil Services (HKG:3303) we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 Jutal Offshore Oil Services:

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

0.24 = CN¥545m ÷ (CN¥3.6b - CN¥1.3b) (Based on the trailing twelve months to June 2024).

Therefore, Jutal Offshore Oil Services has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Energy Services industry average of 11%.

View our latest analysis for Jutal Offshore Oil Services

Historical performance is a great place to start when researching a stock so above you can see the gauge for Jutal Offshore Oil Services' ROCE against it's prior returns. If you're interested in investigating Jutal Offshore Oil Services' past further, check out this free graph covering Jutal Offshore Oil Services' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Jutal Offshore Oil Services' ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 1,016% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. 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 Bottom Line On Jutal Offshore Oil Services' ROCE

To bring it all together, Jutal Offshore Oil Services has done well to increase the returns it's generating from its capital employed. Since the stock has only returned 28% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Jutal Offshore Oil Services does have some risks, we noticed 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.