Slowing Rates Of Return At Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) Leave Little Room For Excitement

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

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

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

0.059 = ر.ق1.8b ÷ (ر.ق33b - ر.ق2.6b) (Based on the trailing twelve months to March 2024).

Thus, Qatar Gas Transport Company Limited (Nakilat) (QPSC) has an ROCE of 5.9%. Ultimately, that's a low return and it under-performs the Oil and Gas industry average of 11%.

Check out 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'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Qatar Gas Transport Company Limited (Nakilat) (QPSC) .

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

There hasn't been much to report for Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s returns and its level of capital employed because both metrics have been steady for the past five years. 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 don't be surprised if Qatar Gas Transport Company Limited (Nakilat) (QPSC) doesn't end up being a multi-bagger in a few years time. 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. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

In Conclusion...

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 154% 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.

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 unpleasant.

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.

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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.