Capital Allocation Trends At Qatar Fuel Company Q.P.S.C. (WOQOD) (DSM:QFLS) Aren't Ideal

If we're looking to avoid a business that is in decline, what are the trends that can warn us ahead of time? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. Ultimately this means that the company is earning less per dollar invested and on top of that, it's shrinking its base of capital employed. In light of that, from a first glance at Qatar Fuel Company Q.P.S.C. (WOQOD) (DSM:QFLS), we've spotted some signs that it could be struggling, so let's investigate.

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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 Qatar Fuel Company Q.P.S.C. (WOQOD) is:

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

0.059 = ر.ق535m ÷ (ر.ق14b - ر.ق4.4b) (Based on the trailing twelve months to March 2025).

Therefore, Qatar Fuel Company Q.P.S.C. (WOQOD) has an ROCE of 5.9%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 9.0%.

View our latest analysis for Qatar Fuel Company Q.P.S.C. (WOQOD)

In the above chart we have measured Qatar Fuel Company Q.P.S.C. (WOQOD)'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 Qatar Fuel Company Q.P.S.C. (WOQOD) .

What Does the ROCE Trend For Qatar Fuel Company Q.P.S.C. (WOQOD) Tell Us?

We are a bit worried about the trend of returns on capital at Qatar Fuel Company Q.P.S.C. (WOQOD). Unfortunately the returns on capital have diminished from the 8.5% that they were earning five years ago. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Qatar Fuel Company Q.P.S.C. (WOQOD) becoming one if things continue as they have.

Our Take On Qatar Fuel Company Q.P.S.C. (WOQOD)'s ROCE

In summary, it's unfortunate that Qatar Fuel Company Q.P.S.C. (WOQOD) is generating lower returns from the same amount of capital. Investors must expect better things on the horizon though because the stock has risen 17% in the last five years. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere.

If you want to continue researching Qatar Fuel Company Q.P.S.C. (WOQOD), you might be interested to know about the 1 warning sign that our analysis has discovered.

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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.