Returns At Jadranski naftovod d.d (ZGSE:JNAF) Appear To Be Weighed Down

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Jadranski naftovod d.d (ZGSE:JNAF) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Jadranski naftovod d.d is:

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

0.077 = Kn359m ÷ (Kn4.8b - Kn131m) (Based on the trailing twelve months to December 2020).

So, Jadranski naftovod d.d has an ROCE of 7.7%. On its own, that's a low figure but it's around the 6.7% average generated by the Oil and Gas industry.

See our latest analysis for Jadranski naftovod d.d

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Jadranski naftovod d.d's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Jadranski naftovod d.d's ROCE Trending?

In terms of Jadranski naftovod d.d's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 7.7% and the business has deployed 24% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

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

In summary, Jadranski naftovod d.d has simply been reinvesting capital and generating the same low rate of return as before. Unsurprisingly, the stock has only gained 6.9% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Jadranski naftovod d.d could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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