Will the Promising Trends At Qatar Industrial Manufacturing Company Q.P.S.C (DSM:QIMD) Continue?

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Qatar Industrial Manufacturing Company Q.P.S.C (DSM:QIMD) so let's look a bit deeper.

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)

0.0078 = ر.ق18m ÷ (ر.ق2.7b - ر.ق276m) (Based on the trailing twelve months to September 2020).

Therefore, Qatar Industrial Manufacturing Company Q.P.S.C has an ROCE of 0.8%. In absolute terms, that's a low return and it also under-performs the Industrials industry average of 5.6%.

See 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 Can We Tell From Qatar Industrial Manufacturing Company Q.P.S.C's ROCE Trend?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 0.8%. The amount of capital employed has increased too, by 53%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Qatar Industrial Manufacturing Company Q.P.S.C's ROCE

To sum it up, Qatar Industrial Manufacturing Company Q.P.S.C has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Considering the stock has delivered 19% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

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 are a bit unpleasant!) 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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This article by Simply Wall St is general in nature. 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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