Returns on Capital Paint A Bright Future For NMDC Energy - P.J.S.C (ADX:NMDCENR)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Speaking of which, we noticed some great changes in NMDC Energy - P.J.S.C's (ADX:NMDCENR) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on NMDC Energy - P.J.S.C is:

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

0.27 = د.إ1.6b ÷ (د.إ19b - د.إ12b) (Based on the trailing twelve months to June 2025).

So, NMDC Energy - P.J.S.C has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Energy Services industry average of 8.4%.

See our latest analysis for NMDC Energy - P.J.S.C

Above you can see how the current ROCE for NMDC Energy - 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 to see what analysts are forecasting going forward, you should check out our free analyst report for NMDC Energy - P.J.S.C .

What Does the ROCE Trend For NMDC Energy - P.J.S.C Tell Us?

The trends we've noticed at NMDC Energy - P.J.S.C are quite reassuring. Over the last three years, returns on capital employed have risen substantially to 27%. Basically the business is earning more per dollar of capital invested and in addition to that, 20% more capital is being employed now too. So we're very much inspired by what we're seeing at NMDC Energy - P.J.S.C thanks to its ability to profitably reinvest capital.

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. Effectively this means that suppliers or short-term creditors are now funding 67% of the business, which is more than it was three years ago. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

The Bottom Line On NMDC Energy - P.J.S.C's ROCE

To sum it up, NMDC Energy - P.J.S.C has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 13% over the last year, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for NMDCENR on our platform that is definitely worth checking out.

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.