Qatar Industrial Manufacturing Company Q.P.S.C (DSM:QIMD) Will Will Want To Turn Around Its Return Trends

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Qatar Industrial Manufacturing Company Q.P.S.C (DSM:QIMD) and its ROCE trend, we weren't exactly thrilled.

What is Return On Capital Employed (ROCE)?

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 Qatar Industrial Manufacturing Company Q.P.S.C is:

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

0.015 = ر.ق39m ÷ (ر.ق2.8b - ر.ق299m) (Based on the trailing twelve months to March 2021).

Therefore, Qatar Industrial Manufacturing Company Q.P.S.C has an ROCE of 1.5%. In absolute terms, that's a low return and it also under-performs the Industrials industry average of 5.4%.

View our latest analysis for Qatar Industrial Manufacturing Company Q.P.S.C

Historical performance is a great place to start when researching a stock so above you can see the gauge for Qatar Industrial Manufacturing Company Q.P.S.C's ROCE against it's prior returns. If you'd like to look at how Qatar Industrial Manufacturing Company 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.

What The Trend Of ROCE Can Tell Us

When we looked at the ROCE trend at Qatar Industrial Manufacturing Company Q.P.S.C, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 1.5% from 2.9% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

In Conclusion...

While returns have fallen for Qatar Industrial Manufacturing Company Q.P.S.C in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. In light of this, the stock has only gained 0.8% over the last five years. Therefore we'd recommend looking further into this stock to confirm if it has the makings of a good investment.

If you want to know some of the risks facing Qatar Industrial Manufacturing Company Q.P.S.C we've found 4 warning signs (2 shouldn't be ignored!) that you should be aware of before investing here.

While Qatar Industrial Manufacturing Company Q.P.S.C isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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