We Like These Underlying Return On Capital Trends At Abu Dhabi National Energy Company PJSC (ADX:TAQA)

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. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Abu Dhabi National Energy Company PJSC's (ADX:TAQA) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

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 Abu Dhabi National Energy Company PJSC, this is the formula:

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

0.058 = د.إ10b ÷ (د.إ213b - د.إ37b) (Based on the trailing twelve months to September 2024).

Therefore, Abu Dhabi National Energy Company PJSC has an ROCE of 5.8%. Even though it's in line with the industry average of 5.8%, it's still a low return by itself.

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 .

So How Is Abu Dhabi National Energy Company PJSC's ROCE Trending?

Abu Dhabi National Energy Company PJSC is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last four years, the ROCE has climbed 188% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

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

To bring it all together, Abu Dhabi National Energy Company PJSC has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Abu Dhabi National Energy Company PJSC can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for Abu Dhabi National Energy Company PJSC that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.