Return Trends At Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) Aren't Appealing

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Qatar Gas Transport Company Limited (Nakilat) (QPSC), this is the formula:

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

0.059 = ر.ق1.9b ÷ (ر.ق34b - ر.ق2.3b) (Based on the trailing twelve months to December 2024).

Therefore, Qatar Gas Transport Company Limited (Nakilat) (QPSC) has an ROCE of 5.9%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 9.7%.

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

In the above chart we have measured Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Qatar Gas Transport Company Limited (Nakilat) (QPSC) .

The Trend Of ROCE

Over the past five years, Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Qatar Gas Transport Company Limited (Nakilat) (QPSC) in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger. With fewer investment opportunities, it makes sense that Qatar Gas Transport Company Limited (Nakilat) (QPSC) has been paying out a decent 52% of its earnings to shareholders. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

What We Can Learn From Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s ROCE

We can conclude that in regards to Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s returns on capital employed and the trends, there isn't much change to report on. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 150% gain to shareholders who have held over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a final note, we found 2 warning signs for Qatar Gas Transport Company Limited (Nakilat) (QPSC) (1 is potentially serious) you should be aware of.

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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.