Many Would Be Envious Of Jindal Worldwide's (NSE:JINDWORLD) Excellent Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. Ergo, when we looked at the ROCE trends at Jindal Worldwide (NSE:JINDWORLD), we liked what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Jindal Worldwide is:

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

0.22 = ₹2.2b ÷ (₹16b - ₹5.9b) (Based on the trailing twelve months to December 2022).

Thus, Jindal Worldwide has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

Check out our latest analysis for Jindal Worldwide

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

SWOT Analysis for Jindal Worldwide

So How Is Jindal Worldwide's ROCE Trending?

In terms of Jindal Worldwide's history of ROCE, it's quite impressive. The company has employed 69% more capital in the last five years, and the returns on that capital have remained stable at 22%. Now considering ROCE is an attractive 22%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. You'll see this when looking at well operated businesses or favorable business models.

Our Take On Jindal Worldwide's ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. On top of that, the stock has rewarded shareholders with a remarkable 210% return to those who've held 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.

On a separate note, we've found 1 warning sign for Jindal Worldwide you'll probably want to know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.