Returns on Capital Paint A Bright Future For Jyoti CNC Automation (NSE:JYOTICNC)

Did you know there are some financial metrics that can provide clues of a potential 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. With that in mind, the ROCE of Jyoti CNC Automation (NSE:JYOTICNC) looks great, so lets see what the trend can tell us.

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Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on Jyoti CNC Automation is:

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

0.22 = ₹4.7b ÷ (₹31b - ₹9.9b) (Based on the trailing twelve months to September 2025).

Therefore, Jyoti CNC Automation has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

See our latest analysis for Jyoti CNC Automation

Above you can see how the current ROCE for Jyoti CNC Automation compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Jyoti CNC Automation .

What The Trend Of ROCE Can Tell Us

The fact that Jyoti CNC Automation is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 22% on its capital. And unsurprisingly, like most companies trying to break into the black, Jyoti CNC Automation is utilizing 552% more capital than it was five years ago. 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.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 32%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Jyoti CNC Automation has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Key Takeaway

Overall, Jyoti CNC Automation gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Given the stock has declined 19% in the last year, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One more thing to note, we've identified 1 warning sign with Jyoti CNC Automation and understanding this should be part of your investment process.

Jyoti CNC Automation 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.