Returns On Capital Are Showing Encouraging Signs At Industries Qatar Q.P.S.C (DSM:IQCD)

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. Speaking of which, we noticed some great changes in Industries Qatar Q.P.S.C's (DSM:IQCD) returns on capital, so let's have a look.

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. 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)

0.05 = ر.ق1.8b ÷ (ر.ق39b - ر.ق2.0b) (Based on the trailing twelve months to March 2024).

Thus, Industries Qatar Q.P.S.C has an ROCE of 5.0%. In absolute terms, that's a low return and it also under-performs the Industrials industry average of 6.5%.

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 analyst report for Industries Qatar Q.P.S.C .

So How Is Industries Qatar Q.P.S.C's ROCE Trending?

While there are companies with higher returns on capital out there, we still find the trend at Industries Qatar Q.P.S.C promising. The figures show that over the last five years, ROCE has grown 297% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Industries Qatar Q.P.S.C's ROCE

To bring it all together, Industries Qatar Q.P.S.C has done well to increase the returns it's generating from its capital employed. 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. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 1 warning sign facing Industries Qatar Q.P.S.C that you might find interesting.

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.

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