Dubai Investments PJSC (DFM:DIC) Has Some Way To Go To Become A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Dubai Investments PJSC (DFM:DIC) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. To calculate this metric for Dubai Investments PJSC, this is the formula:

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

0.034 = د.إ584m ÷ (د.إ21b - د.إ3.8b) (Based on the trailing twelve months to September 2023).

Therefore, Dubai Investments PJSC has an ROCE of 3.4%. On its own that's a low return, but compared to the average of 1.6% generated by the Industrials industry, it's much better.

See our latest analysis for Dubai Investments PJSC

Above you can see how the current ROCE for Dubai Investments PJSC compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Dubai Investments PJSC.

The Trend Of ROCE

Things have been pretty stable at Dubai Investments PJSC, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Dubai Investments PJSC doesn't end up being a multi-bagger in a few years time. With fewer investment opportunities, it makes sense that Dubai Investments PJSC has been paying out a decent 60% of its earnings to shareholders. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

The Bottom Line On Dubai Investments PJSC's ROCE

We can conclude that in regards to Dubai Investments PJSC's returns on capital employed and the trends, there isn't much change to report on. Yet to long term shareholders the stock has gifted them an incredible 159% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a final note, we found 4 warning signs for Dubai Investments PJSC (1 makes us a bit uncomfortable) you should be aware of.

While Dubai Investments PJSC may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.