Why Returns on Capital at Jadard Technology (SHSE:688252) Have Hit a Standstill: Insights for Investors

If you’re on the hunt for a promising investment, keep an eye on a few key factors. Ideally, a company should be pumping more money into its business, and the returns from that investment should be growing. This often signals a strong business model with good opportunities for profit. When we checked out Jadard Technology (SHSE:688252) and its Return on Capital Employed (ROCE) figures, we weren’t particularly excited.

What is Return On Capital Employed (ROCE)?

To put it simply, ROCE measures how well a company generates profit from its capital. You can calculate it using this formula:

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

For Jadard Technology, it looks like this:

0.088 = CN¥185m ÷ (CN¥2.4b – CN¥348m) (Based on the trailing twelve months to September 2024).

This means that Jadard Technology has an ROCE of 8.8%. While that may sound low, it’s actually better than the Semiconductor industry average of 5.0%.

The chart above shows Jadard Technology’s past ROCE, but what’s more important is the future. Check the forecasts from analysts for more insights.

How Are Returns Changing?

Jadard Technology’s ROCE hasn’t shifted much over the past few years. It has remained steady at around 8.8%. Meanwhile, the company has invested 1,927% more capital into its operations. This suggests that the increased investments aren’t yielding better returns.

Another positive note is that their current liabilities have decreased to 14% of total assets. This means suppliers are funding less of the business, lowering some risks from a management angle.

The Bottom Line

In short, while Jadard Technology is reinvesting its capital, the gains aren’t rising. The stock has surged by 75% over the past year, indicating investor optimism for future growth. However, without improvements in ROCE trends, it’s wise to stay cautious.

If you want to dig deeper into Jadard Technology, be aware of the 1 warning sign our analysis found.

Even though Jadard Technology isn’t hitting high return marks, it’s worth looking at this free list of companies that excel in returns on equity and maintain 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 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.