Why The 42% Return On Capital At Jastrzebska Spólka Weglowa (WSE:JSW) Should Have Your Attention

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. 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)

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 Jastrzebska Spólka Weglowa:

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

0.42 = zł8.6b ÷ (zł28b - zł7.6b) (Based on the trailing twelve months to March 2023).

So, Jastrzebska Spólka Weglowa has an ROCE of 42%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 19%.

See our latest analysis for Jastrzebska Spólka Weglowa

Above you can see how the current ROCE for Jastrzebska Spólka Weglowa compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Jastrzebska Spólka Weglowa here for free.

How Are Returns Trending?

We like the trends that we're seeing from Jastrzebska Spólka Weglowa. Over the last five years, returns on capital employed have risen substantially to 42%. The amount of capital employed has increased too, by 101%. So we're very much inspired by what we're seeing at Jastrzebska Spólka Weglowa thanks to its ability to profitably reinvest capital.

What We Can Learn From Jastrzebska Spólka Weglowa's ROCE

All in all, it's terrific to see that Jastrzebska Spólka Weglowa is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 47% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing to note, we've identified 1 warning sign with Jastrzebska Spólka Weglowa and understanding it should be part of your investment process.

Jastrzebska Spólka Weglowa is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.