Will the Promising Trends At JITF Infralogistics (NSE:JITFINFRA) Continue?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. With that in mind, we've noticed some promising trends at JITF Infralogistics (NSE:JITFINFRA) so let's look a bit deeper.

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. Analysts use this formula to calculate it for JITF Infralogistics:

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

0.021 = ₹317m ÷ (₹21b - ₹5.8b) (Based on the trailing twelve months to September 2020).

So, JITF Infralogistics has an ROCE of 2.1%. Ultimately, that's a low return and it under-performs the Infrastructure industry average of 7.5%.

Check out 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 want to delve into the historical earnings, revenue and cash flow of JITF Infralogistics, check out these free graphs here.

How Are Returns Trending?

The fact that JITF Infralogistics is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses four years ago, but now it's earning 2.1% which is a sight for sore eyes. Not only that, but the company is utilizing 128% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 27%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

What We Can Learn From JITF Infralogistics' ROCE

To the delight of most shareholders, JITF Infralogistics has now broken into profitability. Although the company may be facing some issues elsewhere since the stock has plunged 80% in the last three years. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

One more thing: We've identified 4 warning signs with JITF Infralogistics (at least 3 which are potentially serious) , and understanding them would certainly be useful.

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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