Returns On Capital Are Showing Encouraging Signs At Abu Dhabi National Energy Company PJSC (ADX:TAQA)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So when we looked at Abu Dhabi National Energy Company PJSC (ADX:TAQA) and its trend of ROCE, we really liked what we saw.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Abu Dhabi National Energy Company PJSC:

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

0.051 = د.إ9.2b ÷ (د.إ217b - د.إ38b) (Based on the trailing twelve months to March 2025).

Thus, Abu Dhabi National Energy Company PJSC has an ROCE of 5.1%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.1%.

See our latest analysis for Abu Dhabi National Energy Company PJSC

Above you can see how the current ROCE for Abu Dhabi National Energy Company PJSC compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Abu Dhabi National Energy Company PJSC .

What Can We Tell From Abu Dhabi National Energy Company PJSC's ROCE Trend?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 5.1%. 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 114%. 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.

Our Take On Abu Dhabi National Energy Company PJSC's ROCE

To sum it up, Abu Dhabi National Energy Company PJSC has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

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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.