Investors Could Be Concerned With Qatar Fuel Company Q.P.S.C. (WOQOD)'s (DSM:QFLS) Returns On Capital

What financial metrics can indicate to us that a company is maturing or even in decline? More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. This reveals that the company isn't compounding shareholder wealth because returns are falling and its net asset base is shrinking. 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.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.06 = ر.ق535m ÷ (ر.ق14b - ر.ق4.7b) (Based on the trailing twelve months to March 2024).

So, Qatar Fuel Company Q.P.S.C. (WOQOD) has an ROCE of 6.0%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 10%.

Check out 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, you can check out the forecasts from the analysts covering Qatar Fuel Company Q.P.S.C. (WOQOD) for free.

What The Trend Of ROCE Can Tell Us

There is reason to be cautious about Qatar Fuel Company Q.P.S.C. (WOQOD), given the returns are trending downwards. Unfortunately the returns on capital have diminished from the 11% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Qatar Fuel Company Q.P.S.C. (WOQOD) to turn into a multi-bagger.

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 haven't taken kindly to these developments, since the stock has declined 13% from where it was five years ago. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

One more thing: We've identified 3 warning signs with Qatar Fuel Company Q.P.S.C. (WOQOD) (at least 1 which is a bit concerning) , and understanding these would certainly be useful.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com