Stock Analysis

Investors Will Want International Holding Company PJSC's (ADX:IHC) Growth In ROCE To Persist

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There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at International Holding Company PJSC (ADX:IHC) so let's look a bit deeper.

Understanding 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. To calculate this metric for International Holding Company PJSC, this is the formula:

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

0.024 = د.إ4.3b ÷ (د.إ228b - د.إ52b) (Based on the trailing twelve months to December 2022).

So, International Holding Company PJSC has an ROCE of 2.4%. On its own, that's a low figure but it's around the 2.9% average generated by the Industrials industry.

View our latest analysis for International Holding Company PJSC

ADX:IHC Return on Capital Employed March 18th 2023

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'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?

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 four years ago the company was generating losses but things have turned around because it's now earning 2.4% on its capital. And unsurprisingly, like most companies trying to break into the black, International Holding Company PJSC is utilizing 27,889% more capital than it was four years ago. 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 On 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 with the stock having performed exceptionally well over the last three 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.

Like most companies, International Holding Company PJSC does come with some risks, and we've found 2 warning signs that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether International Holding Company PJSC is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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