Jadroplov d.d (ZGSE:JDPL) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Jadroplov d.d (ZGSE:JDPL) and its trend of ROCE, we really liked what we saw.

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)

0.036 = €2.6m ÷ (€99m - €27m) (Based on the trailing twelve months to September 2024).

So, Jadroplov d.d has an ROCE of 3.6%. Ultimately, that's a low return and it under-performs the Shipping industry average of 8.7%.

See our latest analysis for Jadroplov 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Jadroplov d.d.

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

We're delighted to see that Jadroplov d.d is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 3.6% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Jadroplov d.d is utilizing 44% more capital than it was five years ago. 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 27%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. 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.

What We Can Learn From Jadroplov d.d's ROCE

Overall, Jadroplov d.d gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Since the stock has returned a staggering 432% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

One more thing to note, we've identified 1 warning sign with Jadroplov d.d and understanding it should be part of your investment process.

While Jadroplov d.d isn't earning the highest return, check out this free list of companies that are 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.