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

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, International Holding Company PJSC (ADX:IHC) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for International Holding Company PJSC:

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

0.031 = د.إ8.3b ÷ (د.إ338b - د.إ68b) (Based on the trailing twelve months to March 2024).

Thus, International Holding Company PJSC has an ROCE of 3.1%. On its own that's a low return on capital but it's in line with the industry's average returns of 3.3%.

See 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 International Holding Company PJSC's past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that International Holding Company PJSC is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 3.1% on its capital. In addition to that, International Holding Company PJSC is employing 25,003% more capital than previously which is expected of a company that's 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.

The Bottom Line

In summary, it's great to see that International Holding Company PJSC has managed to break into profitability and is continuing to reinvest in its business. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

International Holding Company PJSC does have some risks though, and we've spotted 1 warning sign for International Holding Company PJSC that you might be interested in.

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.

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