Returns At Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) Are On The Way Up

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) looks quite promising in regards to its trends of return on capital.

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. 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 March 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%.

See 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, you can check out the forecasts from the analysts covering Qatar Gas Transport Company Limited (Nakilat) (QPSC) here for free.

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

Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 25% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

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

To sum it up, Qatar Gas Transport Company Limited (Nakilat) (QPSC) is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 121% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Qatar Gas Transport Company Limited (Nakilat) (QPSC) can keep these trends up, it could have a bright future ahead.

If you'd like to know more about Qatar Gas Transport Company Limited (Nakilat) (QPSC), we've spotted 2 warning signs, and 1 of them is a bit concerning.

While Qatar Gas Transport Company Limited (Nakilat) (QPSC) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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.