The Return Trends At Jetpak Top Holding (STO:JETPAK) Look Promising

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 Jetpak Top Holding's (STO:JETPAK) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Jetpak Top Holding:

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

0.088 = kr74m ÷ (kr1.1b - kr246m) (Based on the trailing twelve months to December 2020).

Thus, Jetpak Top Holding has an ROCE of 8.8%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.8%.

See our latest analysis for Jetpak Top Holding

In the above chart we have measured Jetpak Top Holding'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 Jetpak Top Holding here for free.

So How Is Jetpak Top Holding's ROCE Trending?

Jetpak Top Holding has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company was generating losses four years ago, but has managed to turn it around and as we saw earlier is now earning 8.8%, which is always encouraging. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

The Bottom Line

In summary, we're delighted to see that Jetpak Top Holding has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 72% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing Jetpak Top Holding, we've discovered 1 warning sign that you should be aware of.

While Jetpak Top Holding isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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