Stock Analysis

We Like These Underlying Return On Capital Trends At APEX Investment Company P.S.C (ADX:APEX)

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ADX:APEX
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. With that in mind, we've noticed some promising trends at APEX Investment Company P.S.C (ADX:APEX) so let's look a bit deeper.

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)

0.06 = د.إ122m ÷ (د.إ2.3b - د.إ247m) (Based on the trailing twelve months to September 2022).

So, APEX Investment Company P.S.C has an ROCE of 6.0%. In absolute terms, that's a low return and it also under-performs the Basic Materials industry average of 8.2%.

Our analysis indicates that APEX is potentially overvalued!

roce
ADX:APEX Return on Capital Employed December 1st 2022

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 want to delve into the historical earnings, revenue and cash flow of APEX Investment Company P.S.C, check out these free graphs here.

The Trend Of ROCE

APEX Investment Company P.S.C has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 6.0% on its capital. Not only that, but the company is utilizing 238% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

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

Long story short, we're delighted to see that APEX Investment Company P.S.C's reinvestment activities have paid off and the company is now profitable. And a remarkable 449% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

One more thing: We've identified 2 warning signs with APEX Investment Company P.S.C (at least 1 which is a bit unpleasant) , and understanding them would certainly be useful.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Apex Investment PSC is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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