JITF Infralogistics' (NSE:JITFINFRA) Returns On Capital Are Heading Higher

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in JITF Infralogistics' (NSE:JITFINFRA) returns on capital, so let's have a look.

What is 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 JITF Infralogistics, this is the formula:

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

0.054 = ₹909m ÷ (₹22b - ₹5.7b) (Based on the trailing twelve months to June 2021).

Therefore, JITF Infralogistics has an ROCE of 5.4%. In absolute terms, that's a low return and it also under-performs the Infrastructure industry average of 9.8%.

View our latest analysis for JITF Infralogistics

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

What The Trend Of ROCE Can Tell Us

The fact that JITF Infralogistics is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 5.4% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, JITF Infralogistics is utilizing 191% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a related note, the company's ratio of current liabilities to total assets has decreased to 26%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that JITF Infralogistics has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Bottom Line On JITF Infralogistics' ROCE

Overall, JITF Infralogistics gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And a remarkable 164% total return over the last three years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for JITF Infralogistics (of which 2 make us uncomfortable!) that you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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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