Qatar Fuel Company Q.P.S.C.(WOQOD) (DSM:QFLS) Has Some Way To Go To Become A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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 Fuel Company Q.P.S.C.(WOQOD) (DSM:QFLS) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

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)

0.072 = ر.ق658m ÷ (ر.ق13b - ر.ق4.0b) (Based on the trailing twelve months to March 2022).

So, Qatar Fuel Company Q.P.S.C.(WOQOD) has an ROCE of 7.2%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 10%.

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

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Qatar Fuel Company Q.P.S.C.(WOQOD), check out these free graphs here.

The Trend Of ROCE

The returns on capital haven't changed much for Qatar Fuel Company Q.P.S.C.(WOQOD) in recent years. Over the past five years, ROCE has remained relatively flat at around 7.2% and the business has deployed 32% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Key Takeaway

As we've seen above, Qatar Fuel Company Q.P.S.C.(WOQOD)'s returns on capital haven't increased but it is reinvesting in the business. Since the stock has gained an impressive 95% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

Qatar Fuel Company Q.P.S.C.(WOQOD) does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

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.