Jardine Cycle & Carriage (SGX:C07) Is Experiencing Growth In Returns On Capital
There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Jardine Cycle & Carriage (SGX:C07) so let's look a bit deeper.
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 Jardine Cycle & Carriage, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = US$3.1b ÷ (US$32b - US$9.2b) (Based on the trailing twelve months to December 2023).
Therefore, Jardine Cycle & Carriage has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 5.8% generated by the Industrials industry.
View our latest analysis for Jardine Cycle & Carriage
Above you can see how the current ROCE for Jardine Cycle & Carriage 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 Jardine Cycle & Carriage for free.
So How Is Jardine Cycle & Carriage's ROCE Trending?
We like the trends that we're seeing from Jardine Cycle & Carriage. Over the last five years, returns on capital employed have risen substantially to 13%. The amount of capital employed has increased too, by 33%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
The Bottom Line On Jardine Cycle & Carriage's ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Jardine Cycle & Carriage has. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. With that in mind, we believe the promising trends warrant this stock for further investigation.
If you want to know some of the risks facing Jardine Cycle & Carriage we've found 2 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.
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.
