We Like These Underlying Return On Capital Trends At Jastrzebska Spólka Weglowa (WSE:JSW)

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. 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 Jastrzebska Spólka Weglowa's (WSE:JSW) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Jastrzebska Spólka Weglowa, this is the formula:

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

0.13 = zł1.6b ÷ (zł16b - zł3.8b) (Based on the trailing twelve months to December 2021).

So, Jastrzebska Spólka Weglowa has an ROCE of 13%. In isolation, that's a pretty standard return but against the Metals and Mining industry average of 19%, it's not as good.

Check out our latest analysis for Jastrzebska Spólka Weglowa

In the above chart we have measured Jastrzebska Spólka Weglowa's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Jastrzebska Spólka Weglowa here for free.

What Does the ROCE Trend For Jastrzebska Spólka Weglowa Tell Us?

The trends we've noticed at Jastrzebska Spólka Weglowa are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 13%. 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 32%. So we're very much inspired by what we're seeing at Jastrzebska Spólka Weglowa thanks to its ability to profitably reinvest capital.

Our Take On Jastrzebska Spólka Weglowa'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 Jastrzebska Spólka Weglowa has. Since the stock has only returned 6.5% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

One more thing: We've identified 3 warning signs with Jastrzebska Spólka Weglowa (at least 1 which is 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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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.