Shareholders Would Enjoy A Repeat Of Jai Balaji Industries' (NSE:JAIBALAJI) Recent Growth In Returns

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 Jai Balaji Industries (NSE:JAIBALAJI) looks great, so lets see what the trend can tell us.

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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. The formula for this calculation on Jai Balaji Industries is:

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

0.33 = ₹7.7b ÷ (₹39b - ₹16b) (Based on the trailing twelve months to March 2025).

So, Jai Balaji Industries has an ROCE of 33%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

Check out our latest analysis for Jai Balaji Industries

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

So How Is Jai Balaji Industries' ROCE Trending?

Investors would be pleased with what's happening at Jai Balaji Industries. Over the last two years, returns on capital employed have risen substantially to 33%. The amount of capital employed has increased too, by 91%. So we're very much inspired by what we're seeing at Jai Balaji Industries thanks to its ability to profitably reinvest capital.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 40%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Jai Balaji Industries has grown its returns without a reliance on increasing their current liabilities, which we're very happy with. However, current liabilities are still at a pretty high level, so just be aware that this can bring with it some risks.

Our Take On Jai Balaji Industries' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Jai Balaji Industries has. Since the stock has returned a staggering 2,991% 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 Jai Balaji Industries can keep these trends up, it could have a bright future ahead.

Jai Balaji Industries does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

Jai Balaji Industries 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.