There's Been No Shortage Of Growth Recently For Mannai Corporation Q.P.S.C's (DSM:MCCS) Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Mannai Corporation Q.P.S.C (DSM:MCCS) looks quite promising in regards to its trends of return on capital.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Mannai Corporation Q.P.S.C is:

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

0.086 = ر.ق173m ÷ (ر.ق7.2b - ر.ق5.2b) (Based on the trailing twelve months to March 2023).

So, Mannai Corporation Q.P.S.C has an ROCE of 8.6%. In absolute terms, that's a low return, but it's much better than the Industrials industry average of 5.9%.

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

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Mannai Corporation Q.P.S.C's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Mannai Corporation Q.P.S.C Tell Us?

You'd find it hard not to be impressed with the ROCE trend at Mannai Corporation Q.P.S.C. The data shows that returns on capital have increased by 26% over the trailing five years. 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. Mannai Corporation Q.P.S.C may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 72% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

The Bottom Line

In the end, Mannai Corporation Q.P.S.C has proven it's capital allocation skills are good with those higher returns from less amount of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 70% return over the last five years. In light of that, we think it's worth looking further into this stock because if Mannai Corporation Q.P.S.C can keep these trends up, it could have a bright future ahead.

If you'd like to know more about Mannai Corporation Q.P.S.C, we've spotted 4 warning signs, and 3 of them are a bit unpleasant.

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.