Shareholders Are Optimistic That Jayant Agro-Organics (NSE:JAYAGROGN) Will Multiply In Value

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. So, when we ran our eye over Jayant Agro-Organics' (NSE:JAYAGROGN) 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. Analysts use this formula to calculate it for Jayant Agro-Organics:

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

0.24 = ₹1.1b ÷ (₹6.7b - ₹2.3b) (Based on the trailing twelve months to June 2021).

Therefore, Jayant Agro-Organics has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

See our latest analysis for Jayant Agro-Organics

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 Jayant Agro-Organics' past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

In terms of Jayant Agro-Organics' history of ROCE, it's quite impressive. The company has consistently earned 24% for the last five years, and the capital employed within the business has risen 47% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Jayant Agro-Organics can keep this up, we'd be very optimistic about its future.

On a side note, Jayant Agro-Organics has done well to reduce current liabilities to 34% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Bottom Line On Jayant Agro-Organics' 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. And since the stock has risen strongly over the last five years, it appears the market might expect this trend to continue. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

One more thing: We've identified 3 warning signs with Jayant Agro-Organics (at least 1 which is significant) , and understanding them would certainly be useful.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.
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