Stock Analysis

Dubai Investments PJSC (DFM:DIC) Is Doing The Right Things To Multiply Its Share Price

DFM:DIC
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To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Dubai Investments PJSC (DFM:DIC) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

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. The formula for this calculation on Dubai Investments PJSC is:

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

0.067 = د.إ1.1b ÷ (د.إ22b - د.إ4.9b) (Based on the trailing twelve months to December 2021).

Thus, Dubai Investments PJSC has an ROCE of 6.7%. In absolute terms, that's a low return, but it's much better than the Industrials industry average of 5.4%.

View our latest analysis for Dubai Investments PJSC

roce
DFM:DIC Return on Capital Employed February 22nd 2022

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Dubai Investments PJSC Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 6.7%. The amount of capital employed has increased too, by 28%. So we're very much inspired by what we're seeing at Dubai Investments PJSC thanks to its ability to profitably reinvest capital.

The Key Takeaway

To sum it up, Dubai Investments PJSC has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has only returned 29% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Like most companies, Dubai Investments PJSC does come with some risks, and we've found 1 warning sign 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 Dubai Investments 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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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.