Gulf Medical Projects Company (PJSC) (ADX:GMPC) Is Looking To Continue Growing Its Returns On Capital

What are the early trends we should look for to identify a stock that could 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. 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 Gulf Medical Projects Company (PJSC)'s (ADX:GMPC) returns on capital, so let's have a look.

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 Gulf Medical Projects Company (PJSC) is:

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

0.056 = د.إ72m ÷ (د.إ1.4b - د.إ148m) (Based on the trailing twelve months to December 2024).

Thus, Gulf Medical Projects Company (PJSC) has an ROCE of 5.6%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 9.9%.

Check out our latest analysis for Gulf Medical Projects Company (PJSC)

Historical performance is a great place to start when researching a stock so above you can see the gauge for Gulf Medical Projects Company (PJSC)'s ROCE against it's prior returns. If you're interested in investigating Gulf Medical Projects Company (PJSC)'s past further, check out this free graph covering Gulf Medical Projects Company (PJSC)'s past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Gulf Medical Projects Company (PJSC) is showing promise given that its ROCE is trending up and to the right. 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 104% over the last five years. 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.

The Bottom Line

To sum it up, Gulf Medical Projects Company (PJSC) is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 79% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, Gulf Medical Projects Company (PJSC) does come with some risks, and we've found 2 warning signs that you should be aware of.

While Gulf Medical Projects Company (PJSC) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.