Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) Is Looking To Continue Growing Its Returns On Capital

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) and its trend of ROCE, we really liked what we saw.

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. Analysts use this formula to calculate it for Qatar Gas Transport Company Limited (Nakilat) (QPSC):

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

0.066 = ر.ق1.9b ÷ (ر.ق32b - ر.ق4.2b) (Based on the trailing twelve months to June 2022).

Therefore, Qatar Gas Transport Company Limited (Nakilat) (QPSC) has an ROCE of 6.6%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 11%.

View our latest analysis for Qatar Gas Transport Company Limited (Nakilat) (QPSC)

Above you can see how the current ROCE for Qatar Gas Transport Company Limited (Nakilat) (QPSC) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Qatar Gas Transport Company Limited (Nakilat) (QPSC).

What Does the ROCE Trend For Qatar Gas Transport Company Limited (Nakilat) (QPSC) Tell Us?

Qatar Gas Transport Company Limited (Nakilat) (QPSC) is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 26% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s ROCE

In summary, we're delighted to see that Qatar Gas Transport Company Limited (Nakilat) (QPSC) has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One final note, you should learn about the 2 warning signs we've spotted with Qatar Gas Transport Company Limited (Nakilat) (QPSC) (including 1 which is a bit unpleasant) .

While Qatar Gas Transport Company Limited (Nakilat) (QPSC) 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.

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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.