The Trend Of High Returns At Jindal Saw (NSE:JINDALSAW) Has Us Very Interested

There are a few key trends to look for if we want to identify the next 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Jindal Saw's (NSE:JINDALSAW) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Jindal Saw, this is the formula:

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

0.23 = ₹29b ÷ (₹211b - ₹84b) (Based on the trailing twelve months to September 2024).

Thus, Jindal Saw has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 14%.

View our latest analysis for Jindal Saw

In the above chart we have measured Jindal Saw's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Jindal Saw .

So How Is Jindal Saw's ROCE Trending?

The trends we've noticed at Jindal Saw are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 23%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 36%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Jindal Saw's ROCE

In summary, it's great to see that Jindal Saw can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 874% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Jindal Saw can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Jindal Saw that you might find interesting.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.