We Like These Underlying Return On Capital Trends At International Holding Company PJSC (ADX:IHC)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at International Holding Company PJSC (ADX:IHC) and its trend of ROCE, we really liked what we saw.

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. 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)

0.016 = د.إ3.0b ÷ (د.إ236b - د.إ46b) (Based on the trailing twelve months to September 2023).

So, International Holding Company PJSC has an ROCE of 1.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 1.6%.

View 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?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last four years, returns on capital employed have risen substantially to 1.6%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 12,086%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On International Holding Company PJSC's ROCE

In summary, it's great to see that International Holding Company PJSC can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 867% total return over the last three years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if International Holding Company PJSC can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing International Holding Company PJSC, we've discovered 1 warning sign that you should be aware of.

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.