Returns on Capital Paint A Bright Future For ADNOC Drilling Company P.J.S.C (ADX:ADNOCDRILL)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in ADNOC Drilling Company P.J.S.C's (ADX:ADNOCDRILL) returns on capital, so let's have a look.

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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 ADNOC Drilling Company P.J.S.C, this is the formula:

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

0.29 = US$1.7b ÷ (US$7.7b - US$1.9b) (Based on the trailing twelve months to September 2025).

Thus, ADNOC Drilling Company P.J.S.C has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 8.7% earned by companies in a similar industry.

Check out our latest analysis for ADNOC Drilling Company P.J.S.C

In the above chart we have measured ADNOC Drilling Company P.J.S.C's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for ADNOC Drilling Company P.J.S.C .

What Does the ROCE Trend For ADNOC Drilling Company P.J.S.C Tell Us?

ADNOC Drilling Company P.J.S.C has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 135% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 25% of its operations, which isn't ideal. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

In Conclusion...

In summary, we're delighted to see that ADNOC Drilling Company P.J.S.C has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 103% total return over the last three years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 1 warning sign facing ADNOC Drilling Company P.J.S.C that you might find interesting.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.