Returns on Capital Paint A Bright Future For Abu Dhabi National Oil Company for Distribution PJSC (ADX:ADNOCDIST)

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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 Abu Dhabi National Oil Company for Distribution PJSC's (ADX:ADNOCDIST) 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 Abu Dhabi National Oil Company for Distribution PJSC is:

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

0.28 = د.إ2.8b ÷ (د.إ12b - د.إ2.6b) (Based on the trailing twelve months to December 2020).

So, Abu Dhabi National Oil Company for Distribution PJSC has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 8.8%.

See our latest analysis for Abu Dhabi National Oil Company for Distribution PJSC

Above you can see how the current ROCE for Abu Dhabi National Oil Company for Distribution PJSC compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Abu Dhabi National Oil Company for Distribution PJSC.

How Are Returns Trending?

Abu Dhabi National Oil Company for Distribution PJSC has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last four years, the ROCE has climbed 55% in that same time. 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. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Abu Dhabi National Oil Company for Distribution PJSC's ROCE

In summary, we're delighted to see that Abu Dhabi National Oil Company for Distribution PJSC has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 118% to shareholders over the last three 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 Abu Dhabi National Oil Company for Distribution PJSC can keep these trends up, it could have a bright future ahead.

One more thing: We've identified 3 warning signs with Abu Dhabi National Oil Company for Distribution PJSC (at least 2 which shouldn't be ignored) , and understanding these would certainly be useful.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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