Industries Qatar Q.P.S.C (DSM:IQCD) Is Looking To Continue Growing Its Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. So on that note, Industries Qatar Q.P.S.C (DSM:IQCD) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What is it?

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 Industries Qatar Q.P.S.C, this is the formula:

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

0.042 = ر.ق1.4b ÷ (ر.ق36b - ر.ق1.7b) (Based on the trailing twelve months to March 2021).

Thus, Industries Qatar Q.P.S.C has an ROCE of 4.2%. Ultimately, that's a low return and it under-performs the Industrials industry average of 5.8%.

Check out our latest analysis for Industries Qatar Q.P.S.C

In the above chart we have measured Industries Qatar Q.P.S.C'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 Industries Qatar Q.P.S.C.

What Does the ROCE Trend For Industries Qatar Q.P.S.C Tell Us?

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. The figures show that over the last five years, ROCE has grown 51% whilst employing roughly the same amount of capital. 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Industries Qatar Q.P.S.C's ROCE

To sum it up, Industries Qatar Q.P.S.C is collecting higher returns from the same amount of capital, and that's impressive. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 54% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we've found 1 warning sign for Industries Qatar Q.P.S.C that we think you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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