If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at J&T Global Express (HKG:1519) so let's look a bit deeper.

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 J&T Global Express:

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

0.0041 = US$15m ÷ (US$6.7b - US$3.1b) (Based on the trailing twelve months to June 2024).

So, J&T Global Express has an ROCE of 0.4%. In absolute terms, that's a low return and it also under-performs the Logistics industry average of 7.2%.

In the above chart we have measured J&T Global Express' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering J&T Global Express for free.

What Can We Tell From J&T Global Express' ROCE Trend?

J&T Global Express has recently broken into profitability so their prior investments seem to be paying off. About three years ago the company was generating losses but things have turned around because it's now earning 0.4% on its capital. Not only that, but the company is utilizing 31% more capital than before, but that's to be expected from a company 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.

On a side note, J&T Global Express' current liabilities are still rather high at 47% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On J&T Global Express' ROCE

Overall, J&T Global Express gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And since the stock has fallen 52% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for 1519 that compares the share price and estimated value.

While J&T Global Express 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.