Investors Will Want Apex Investment PSC's (ADX:APEX) Growth In ROCE To Persist

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. With that in mind, we've noticed some promising trends at Apex Investment PSC (ADX:APEX) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Apex Investment PSC, this is the formula:

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

0.057 = د.إ111m ÷ (د.إ2.1b - د.إ186m) (Based on the trailing twelve months to March 2024).

Therefore, Apex Investment PSC has an ROCE of 5.7%. In absolute terms, that's a low return, but it's much better than the Basic Materials industry average of 4.1%.

Check out our latest analysis for Apex Investment PSC

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 , check out these free graphs detailing revenue and cash flow performance of Apex Investment PSC.

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 5.7%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 222%. So we're very much inspired by what we're seeing at Apex Investment PSC thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Apex Investment PSC is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 146% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing Apex Investment PSC, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.