Gulf Medical Projects Company (PJSC) (ADX:GMPC) Might Have The Makings Of A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Gulf Medical Projects Company (PJSC) (ADX:GMPC) looks quite promising in regards to its trends of return on capital.

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)

0.026 = د.إ28m ÷ (د.إ1.2b - د.إ144m) (Based on the trailing twelve months to March 2023).

Thus, Gulf Medical Projects Company (PJSC) has an ROCE of 2.6%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 11%.

View 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'd like to look at how Gulf Medical Projects Company (PJSC) has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

SWOT Analysis for Gulf Medical Projects Company (PJSC)

How Are Returns Trending?

It's great to see that Gulf Medical Projects Company (PJSC) has started to generate some pre-tax earnings from prior investments. The company was generating losses five years ago, but now it's turned around, earning 2.6% which is no doubt a relief for some early shareholders. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 24%. This could potentially mean that the company is selling some of its assets.

The Key Takeaway

In a nutshell, we're pleased to see that Gulf Medical Projects Company (PJSC) has been able to generate higher returns from less capital. Considering the stock has delivered 32% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One final note, you should learn about the 3 warning signs we've spotted with Gulf Medical Projects Company (PJSC) (including 1 which is a bit unpleasant) .

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.