Here's What's Concerning About International Holding Company PJSC's (ADX:IHC) Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at International Holding Company PJSC (ADX:IHC) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on International Holding Company PJSC is:

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

0.042 = د.إ13b ÷ (د.إ402b - د.إ89b) (Based on the trailing twelve months to December 2024).

Thus, International Holding Company PJSC has an ROCE of 4.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 4.1%.

See our latest analysis for International Holding Company PJSC

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating International Holding Company PJSC's past further, check out this free graph covering International Holding Company PJSC's past earnings, revenue and cash flow.

So How Is International Holding Company PJSC's ROCE Trending?

In terms of International Holding Company PJSC's historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 6.3%, but since then they've fallen to 4.2%. 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. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line

In summary, despite lower returns in the short term, we're encouraged to see that International Holding Company PJSC is reinvesting for growth and has higher sales as a result. And long term investors must be optimistic going forward because the stock has returned a huge 2,639% to shareholders in the last five years. So should these growth trends continue, we'd be optimistic on the stock going forward.

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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.