Investors Should Be Encouraged By Jubilant Ingrevia's (NSE:JUBLINGREA) Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Jubilant Ingrevia (NSE:JUBLINGREA) we really liked what we saw.

What Is 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. To calculate this metric for Jubilant Ingrevia, this is the formula:

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

0.20 = ₹5.5b ÷ (₹41b - ₹13b) (Based on the trailing twelve months to September 2022).

Therefore, Jubilant Ingrevia has an ROCE of 20%. On its own, that's a very good return and it's on par with the returns earned by companies in a similar industry.

Check out our latest analysis for Jubilant Ingrevia

Above you can see how the current ROCE for Jubilant Ingrevia compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Jubilant Ingrevia here for free.

So How Is Jubilant Ingrevia's ROCE Trending?

Investors would be pleased with what's happening at Jubilant Ingrevia. The numbers show that in the last two years, the returns generated on capital employed have grown considerably to 20%. 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 124%. So we're very much inspired by what we're seeing at Jubilant Ingrevia thanks to its ability to profitably reinvest capital.

The Bottom Line On Jubilant Ingrevia's 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 Jubilant Ingrevia has. And given the stock has remained rather flat over the last year, there might be an opportunity here if other metrics are strong. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you want to continue researching Jubilant Ingrevia, you might be interested to know about the 1 warning sign that our analysis has discovered.

Jubilant Ingrevia 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.