APEX Investment Company P.S.C (ADX:APEX) Is Looking To Continue Growing Its Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in APEX Investment Company P.S.C's (ADX:APEX) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on APEX Investment Company P.S.C is:

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

0.013 = د.إ24m ÷ (د.إ2.3b - د.إ392m) (Based on the trailing twelve months to March 2022).

So, APEX Investment Company P.S.C has an ROCE of 1.3%. Ultimately, that's a low return and it under-performs the Basic Materials industry average of 8.0%.

See our latest analysis for APEX Investment Company P.S.C

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how APEX Investment Company P.S.C has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 1.3%. The amount of capital employed has increased too, by 226%. So we're very much inspired by what we're seeing at APEX Investment Company P.S.C thanks to its ability to profitably reinvest capital.

What We Can Learn From APEX Investment Company P.S.C's ROCE

To sum it up, APEX Investment Company P.S.C has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 549% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if APEX Investment Company P.S.C can keep these trends up, it could have a bright future ahead.

APEX Investment Company P.S.C does have some risks, we noticed 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

While APEX Investment Company P.S.C 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.