Stock Analysis

Jadroplov d.d (ZGSE:JDPL) Is Doing The Right Things To Multiply Its Share Price

ZGSE:JDPL
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If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 Jadroplov d.d (ZGSE:JDPL) and its trend of ROCE, we really liked what we saw.

What Is 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 Jadroplov d.d, this is the formula:

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

0.066 = €6.1m ÷ (€116m - €23m) (Based on the trailing twelve months to March 2023).

Thus, Jadroplov d.d has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 15%.

View our latest analysis for Jadroplov d.d

roce
ZGSE:JDPL Return on Capital Employed July 5th 2023

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 Jadroplov d.d's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

The fact that Jadroplov d.d 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 6.6% which is a sight for sore eyes. Not only that, but the company is utilizing 63% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 20%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

The Bottom Line On Jadroplov d.d's ROCE

Long story short, we're delighted to see that Jadroplov d.d's reinvestment activities have paid off and the company is now profitable. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Jadroplov d.d can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing Jadroplov d.d we've found 4 warning signs (2 are a bit concerning!) that you should be aware of before investing here.

While Jadroplov 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.