Jadranski naftovod d.d (ZGSE:JNAF) Has More To Do To Multiply In Value Going Forward

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. However, after briefly looking over the numbers, we don't think Jadranski naftovod d.d (ZGSE:JNAF) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. To calculate this metric for Jadranski naftovod d.d, this is the formula:

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

0.079 = Kn399m ÷ (Kn5.1b - Kn59m) (Based on the trailing twelve months to September 2022).

So, Jadranski naftovod d.d has an ROCE of 7.9%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 15%.

See our latest analysis for Jadranski naftovod d.d

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

What Can We Tell From Jadranski naftovod d.d's ROCE Trend?

The returns on capital haven't changed much for Jadranski naftovod d.d in recent years. Over the past five years, ROCE has remained relatively flat at around 7.9% and the business has deployed 28% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On Jadranski naftovod d.d's ROCE

In conclusion, Jadranski naftovod d.d has been investing more capital into the business, but returns on that capital haven't increased. And with the stock having returned a mere 22% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you want to continue researching Jadranski naftovod d.d, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Jadranski naftovod d.d 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.

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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.