Jardine Cycle & Carriage (SGX:C07) Has Some Way To Go To Become A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. However, after investigating Jardine Cycle & Carriage (SGX:C07), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on Jardine Cycle & Carriage is:

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

0.11 = US$2.6b ÷ (US$32b - US$8.5b) (Based on the trailing twelve months to December 2024).

Thus, Jardine Cycle & Carriage has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Industrials industry average of 6.3% it's much better.

View our latest analysis for Jardine Cycle & Carriage

In the above chart we have measured Jardine Cycle & Carriage's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Jardine Cycle & Carriage .

What Can We Tell From Jardine Cycle & Carriage's ROCE Trend?

There hasn't been much to report for Jardine Cycle & Carriage's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Jardine Cycle & Carriage doesn't end up being a multi-bagger in a few years time. With fewer investment opportunities, it makes sense that Jardine Cycle & Carriage has been paying out a decent 40% of its earnings to shareholders. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

What We Can Learn From Jardine Cycle & Carriage's ROCE

In summary, Jardine Cycle & Carriage isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has gained an impressive 65% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Jardine Cycle & Carriage does have some risks though, and we've spotted 1 warning sign for Jardine Cycle & Carriage that you might be interested in.

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.