Abu Dhabi Ports Company PJSC (ADX:ADPORTS) Is Doing The Right Things To Multiply Its Share Price

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. 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 Abu Dhabi Ports Company PJSC (ADX:ADPORTS) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for Abu Dhabi Ports Company PJSC:

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

0.06 = د.إ2.7b ÷ (د.إ52b - د.إ8.0b) (Based on the trailing twelve months to December 2023).

So, Abu Dhabi Ports Company PJSC has an ROCE of 6.0%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.3%.

View our latest analysis for Abu Dhabi Ports Company PJSC

In the above chart we have measured Abu Dhabi Ports Company 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 Ports Company PJSC.

What Does the ROCE Trend For Abu Dhabi Ports Company PJSC Tell Us?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last four years, returns on capital employed have risen substantially to 6.0%. The amount of capital employed has increased too, by 160%. 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 Ports Company PJSC's ROCE

All in all, it's terrific to see that Abu Dhabi Ports Company PJSC is reaping the rewards from prior investments and is growing its capital base. Considering the stock has delivered 3.4% to its stockholders over the last year, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

Abu Dhabi Ports Company PJSC does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is concerning...

While Abu Dhabi Ports Company PJSC 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.