The Trend Of High Returns At ADNOC Drilling Company P.J.S.C (ADX:ADNOCDRILL) Has Us Very Interested

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of ADNOC Drilling Company P.J.S.C (ADX:ADNOCDRILL) we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for ADNOC Drilling Company P.J.S.C:

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

0.30 = US$1.6b ÷ (US$7.9b - US$2.4b) (Based on the trailing twelve months to March 2025).

Therefore, ADNOC Drilling Company P.J.S.C has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Energy Services industry average of 8.7%.

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

Above you can see how the current ROCE for ADNOC Drilling Company P.J.S.C compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering ADNOC Drilling Company P.J.S.C for free.

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

ADNOC Drilling Company P.J.S.C's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 136% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 31% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

The Bottom Line On ADNOC Drilling Company P.J.S.C's ROCE

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. Since the stock has returned a solid 89% to shareholders over the last three years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if ADNOC Drilling Company P.J.S.C can keep these trends up, it could have a bright future ahead.

If you want to continue researching ADNOC Drilling Company P.J.S.C, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.