Jadroplov d.d (ZGSE:JDPL) Is Looking To Continue Growing Its Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Jadroplov d.d's (ZGSE:JDPL) returns on capital, so let's have a look.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its 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)

0.052 = €4.6m ÷ (€107m - €19m) (Based on the trailing twelve months to June 2023).

Therefore, Jadroplov d.d has an ROCE of 5.2%. Ultimately, that's a low return and it under-performs the Shipping industry average of 16%.

Check out our latest analysis for Jadroplov d.d

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

So How Is Jadroplov d.d's ROCE Trending?

Jadroplov d.d has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 5.2% which is a sight for sore eyes. Not only that, but the company is utilizing 49% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

One more thing to note, Jadroplov d.d has decreased current liabilities to 17% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that Jadroplov d.d has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line

Long story short, we're delighted to see that Jadroplov d.d's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a staggering 252% 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.

On a final note, we found 5 warning signs for Jadroplov d.d (3 shouldn't be ignored) you should be aware of.

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.