We Think Abu Dhabi National Oil Company for Distribution PJSC (ADX:ADNOCDIST) Might Have The DNA Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Abu Dhabi National Oil Company for Distribution PJSC (ADX:ADNOCDIST) looks great, so lets see what the trend can tell us.

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. To calculate this metric for Abu Dhabi National Oil Company for Distribution PJSC, this is the formula:

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

0.29 = د.إ3.0b ÷ (د.إ16b - د.إ5.6b) (Based on the trailing twelve months to December 2022).

So, Abu Dhabi National Oil Company for Distribution PJSC has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

Check out our latest analysis for Abu Dhabi National Oil Company for Distribution PJSC

In the above chart we have measured Abu Dhabi National Oil Company for Distribution PJSC's prior ROCE against its prior performance, but the future is arguably more important. 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.

What Can We Tell From Abu Dhabi National Oil Company for Distribution PJSC's ROCE Trend?

We like the trends that we're seeing from Abu Dhabi National Oil Company for Distribution PJSC. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 29%. 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 22%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From Abu Dhabi National Oil Company for Distribution PJSC's ROCE

To sum it up, Abu Dhabi National Oil Company for Distribution PJSC has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 120% 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 Abu Dhabi National Oil Company for Distribution PJSC can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Abu Dhabi National Oil Company for Distribution PJSC, we've discovered 2 warning signs that you should be aware of.

Abu Dhabi National Oil Company for Distribution PJSC is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.