Joint (NASDAQ:JYNT) Shareholders Will Want The ROCE Trajectory To Continue

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Joint's (NASDAQ:JYNT) returns on capital, so let's have a look.

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. To calculate this metric for Joint, this is the formula:

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

0.15 = US$8.5m ÷ (US$78m - US$22m) (Based on the trailing twelve months to June 2021).

So, Joint has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 12% generated by the Healthcare industry.

Check out our latest analysis for Joint

Above you can see how the current ROCE for Joint 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 Joint here for free.

So How Is Joint's ROCE Trending?

Joint has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 15% which is a sight for sore eyes. In addition to that, Joint is employing 183% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

What We Can Learn From Joint's ROCE

Long story short, we're delighted to see that Joint's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a staggering 3,092% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 3 warning signs facing Joint that you might find interesting.

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.

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.

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