The Returns On Capital At Emirates Central Cooling Systems (DFM:EMPOWER) Don't Inspire Confidence

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Although, when we looked at Emirates Central Cooling Systems (DFM:EMPOWER), it didn't seem to tick all of these boxes.

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

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 Emirates Central Cooling Systems is:

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

0.12 = د.إ1.1b ÷ (د.إ12b - د.إ2.4b) (Based on the trailing twelve months to June 2025).

So, Emirates Central Cooling Systems has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Water Utilities industry average of 7.1% it's much better.

Check out our latest analysis for Emirates Central Cooling Systems

Above you can see how the current ROCE for Emirates Central Cooling Systems 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 Emirates Central Cooling Systems .

What Can We Tell From Emirates Central Cooling Systems' ROCE Trend?

In terms of Emirates Central Cooling Systems' historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 16%, but since then they've fallen to 12%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line

Bringing it all together, while we're somewhat encouraged by Emirates Central Cooling Systems' reinvestment in its own business, we're aware that returns are shrinking. And with the stock having returned a mere 4.8% in the last year to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Emirates Central Cooling Systems does have some risks though, and we've spotted 1 warning sign for Emirates Central Cooling Systems that you might be interested in.

While Emirates Central Cooling Systems may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.