We Like These Underlying Return On Capital Trends At JITF Infralogistics (NSE:JITFINFRA)

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 looked at JITF Infralogistics (NSE:JITFINFRA) and its trend of ROCE, 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. The formula for this calculation on JITF Infralogistics is:

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

0.078 = ₹1.7b ÷ (₹29b - ₹7.3b) (Based on the trailing twelve months to December 2022).

Thus, JITF Infralogistics has an ROCE of 7.8%. In absolute terms, that's a low return but it's around the Infrastructure industry average of 9.5%.

See our latest analysis for JITF Infralogistics

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 JITF Infralogistics has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For JITF Infralogistics Tell Us?

We're delighted to see that JITF Infralogistics is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 7.8% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, JITF Infralogistics is utilizing 175% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

On a related note, the company's ratio of current liabilities to total assets has decreased to 25%, which basically reduces it's funding from the likes of short-term creditors or suppliers. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

The Bottom Line On JITF Infralogistics' ROCE

To the delight of most shareholders, JITF Infralogistics has now broken into profitability. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if JITF Infralogistics can keep these trends up, it could have a bright future ahead.

If you'd like to know more about JITF Infralogistics, we've spotted 5 warning signs, and 3 of them are concerning.

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.