Shareholders Are Optimistic That Jash Engineering (NSE:JASH) Will Multiply In Value

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. That's why when we briefly looked at Jash Engineering's (NSE:JASH) ROCE trend, we were very happy with what we saw.

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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 Jash Engineering, this is the formula:

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

0.27 = ₹1.1b ÷ (₹7.0b - ₹2.9b) (Based on the trailing twelve months to December 2024).

Therefore, Jash Engineering has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Machinery industry average of 16%.

Check out our latest analysis for Jash Engineering

Historical performance is a great place to start when researching a stock so above you can see the gauge for Jash Engineering's ROCE against it's prior returns. If you're interested in investigating Jash Engineering's past further, check out this free graph covering Jash Engineering's past earnings, revenue and cash flow .

So How Is Jash Engineering's ROCE Trending?

Jash Engineering deserves to be commended in regards to it's returns. The company has employed 198% more capital in the last five years, and the returns on that capital have remained stable at 27%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

Another thing to note, Jash Engineering has a high ratio of current liabilities to total assets of 42%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Jash Engineering's ROCE

In short, we'd argue Jash Engineering has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And long term investors would be thrilled with the 3,122% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

While Jash Engineering looks impressive, no company is worth an infinite price. The intrinsic value infographic for JASH helps visualize whether it is currently trading for a fair price.

Jash Engineering is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.