International Holding Company PJSC (ADX:IHC) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Speaking of which, we noticed some great changes in International Holding Company PJSC's (ADX:IHC) 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. 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)

0.065 = د.إ8.3b ÷ (د.إ164b - د.إ36b) (Based on the trailing twelve months to June 2022).

So, International Holding Company PJSC has an ROCE of 6.5%. On its own that's a low return, but compared to the average of 5.2% generated by the Industrials industry, it's much better.

Check out our latest analysis for International Holding Company PJSC

Historical performance is a great place to start when researching a stock so above you can see the gauge for International Holding Company PJSC's ROCE against it's prior returns. If you'd like to look at how International Holding Company PJSC has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From International Holding Company PJSC's ROCE Trend?

International Holding Company PJSC has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses three years ago, but now it's earning 6.5% which is a sight for sore eyes. Not only that, but the company is utilizing 8,249% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

What We Can Learn From International Holding Company PJSC's ROCE

Long story short, we're delighted to see that International Holding Company PJSC's reinvestment activities have paid off and the company is now profitable. And a remarkable 15,576% total return over the last three years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing to note, we've identified 2 warning signs with International Holding Company PJSC and understanding them should be part of your investment process.

While International Holding Company PJSC 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.