Investors Will Want Jay Jalaram Technologies' (NSE:KORE) Growth In ROCE To Persist

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in Jay Jalaram Technologies' (NSE:KORE) returns on capital, so let's have a look.

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. To calculate this metric for Jay Jalaram Technologies, this is the formula:

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

0.12 = ₹132m ÷ (₹1.8b - ₹684m) (Based on the trailing twelve months to September 2024).

Therefore, Jay Jalaram Technologies has an ROCE of 12%. In absolute terms, that's a pretty standard return but compared to the Specialty Retail industry average it falls behind.

View our latest analysis for Jay Jalaram Technologies

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'd like to look at how Jay Jalaram Technologies has performed in the past in other metrics, you can view this free graph of Jay Jalaram Technologies' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Jay Jalaram Technologies. The data shows that returns on capital have increased substantially over the last five years to 12%. The amount of capital employed has increased too, by 906%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Jay Jalaram Technologies' ROCE

To sum it up, Jay Jalaram Technologies has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Considering the stock has delivered 3.5% to its stockholders over the last year, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

On a final note, we found 3 warning signs for Jay Jalaram Technologies (2 can't be ignored) you should be aware of.

While Jay Jalaram Technologies isn't earning the highest return, check out this free list of companies that are 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.