Mannai Corporation Q.P.S.C (DSM:MCCS) Could Become A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of Mannai Corporation Q.P.S.C (DSM:MCCS) we really liked what we saw.

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. Analysts use this formula to calculate it for Mannai Corporation Q.P.S.C:

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

0.28 = ر.ق599m ÷ (ر.ق7.7b - ر.ق5.5b) (Based on the trailing twelve months to September 2022).

Therefore, Mannai Corporation Q.P.S.C has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Industrials industry average of 13%.

Check out our latest analysis for Mannai Corporation Q.P.S.C

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mannai Corporation Q.P.S.C's ROCE against it's prior returns. If you'd like to look at how Mannai Corporation Q.P.S.C has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Mannai Corporation Q.P.S.C's ROCE Trending?

You'd find it hard not to be impressed with the ROCE trend at Mannai Corporation Q.P.S.C. We found that the returns on capital employed over the last five years have risen by 537%. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. Speaking of capital employed, the company is actually utilizing 66% less than it was five years ago, which can be indicative of a business that's improving its efficiency. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Effectively this means that suppliers or short-term creditors are now funding 72% of the business, which is more than it was five years ago. And with current liabilities at those levels, that's pretty high.

What We Can Learn From Mannai Corporation Q.P.S.C's ROCE

In a nutshell, we're pleased to see that Mannai Corporation Q.P.S.C has been able to generate higher returns from less capital. And a remarkable 128% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Mannai Corporation Q.P.S.C we've found 4 warning signs (3 can't be ignored!) that you should be aware of before investing here.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.