Returns On Capital At John Bean Technologies (NYSE:JBT) Paint A Concerning Picture

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at John Bean Technologies (NYSE:JBT) and its ROCE trend, we weren't exactly thrilled.

What Is 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. Analysts use this formula to calculate it for John Bean Technologies:

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

0.088 = US$169m ÷ (US$2.6b - US$619m) (Based on the trailing twelve months to September 2022).

Therefore, John Bean Technologies has an ROCE of 8.8%. In absolute terms, that's a low return but it's around the Machinery industry average of 11%.

Check out our latest analysis for John Bean Technologies

In the above chart we have measured John Bean Technologies' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for John Bean Technologies.

How Are Returns Trending?

In terms of John Bean Technologies' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 8.8% from 14% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Key Takeaway

While returns have fallen for John Bean Technologies in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These growth trends haven't led to growth returns though, since the stock has fallen 10% over the last five years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

John Bean Technologies does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

While John Bean Technologies 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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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.