Qatar Fuel Company Q.P.S.C. (WOQOD) (DSM:QFLS) Will Be Looking To Turn Around Its Returns

When it comes to investing, there are some useful financial metrics that can warn us when a business is potentially in trouble. A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. 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. And from a first read, things don't look too good at Qatar Fuel Company Q.P.S.C. (WOQOD) (DSM:QFLS), so let's see why.

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

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. Analysts use this formula to calculate it for Qatar Fuel Company Q.P.S.C. (WOQOD):

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

0.054 = ر.ق524m ÷ (ر.ق15b - ر.ق4.9b) (Based on the trailing twelve months to December 2023).

Thus, Qatar Fuel Company Q.P.S.C. (WOQOD) has an ROCE of 5.4%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 11%.

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) .

How Are Returns Trending?

In terms of Qatar Fuel Company Q.P.S.C. (WOQOD)'s historical ROCE movements, the trend doesn't inspire confidence. About five years ago, returns on capital were 10%, however they're now substantially lower than that as we saw above. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. 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. 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.

In Conclusion...

All in all, the lower returns from the same amount of capital employed aren't exactly signs of a compounding machine. And, the stock has remained flat over the last five years, so investors don't seem too impressed either. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.

One final note, you should learn about the 2 warning signs we've spotted with Qatar Fuel Company Q.P.S.C. (WOQOD) (including 1 which is a bit concerning) .

While Qatar Fuel Company Q.P.S.C. (WOQOD) may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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

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.