Stock Analysis

Returns On Capital Signal Tricky Times Ahead For Slavneft-Yaroslavnefteorgsintez (MCX:JNOS)

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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. However, after briefly looking over the numbers, we don't think Slavneft-Yaroslavnefteorgsintez (MCX:JNOS) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Return On Capital Employed (ROCE): What is it?

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. Analysts use this formula to calculate it for Slavneft-Yaroslavnefteorgsintez:

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

0.041 = ₽4.6b ÷ (₽131b - ₽18b) (Based on the trailing twelve months to June 2021).

Thus, Slavneft-Yaroslavnefteorgsintez has an ROCE of 4.1%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 11%.

See our latest analysis for Slavneft-Yaroslavnefteorgsintez

MISX:JNOS Return on Capital Employed February 26th 2022

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 Slavneft-Yaroslavnefteorgsintez, check out these free graphs here.

What Does the ROCE Trend For Slavneft-Yaroslavnefteorgsintez Tell Us?

On the surface, the trend of ROCE at Slavneft-Yaroslavnefteorgsintez doesn't inspire confidence. Over the last five years, returns on capital have decreased to 4.1% from 15% five years ago. However it looks like Slavneft-Yaroslavnefteorgsintez might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

In Conclusion...

Bringing it all together, while we're somewhat encouraged by Slavneft-Yaroslavnefteorgsintez's reinvestment in its own business, we're aware that returns are shrinking. And in the last five years, the stock has given away 40% so the market doesn't look too hopeful on these trends strengthening any time soon. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

One final note, you should learn about the 5 warning signs we've spotted with Slavneft-Yaroslavnefteorgsintez (including 1 which is a bit unpleasant) .

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.

Valuation is complex, but we're helping make it simple.

Find out whether Slavneft-Yaroslavnefteorgsintez is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Public Joint Stock Company Slavneft-Yaroslavnefteorgsintez produces and sells oil products in Russia.

Slightly overvalued with imperfect balance sheet.

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