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

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. 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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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 Gas Transport Company Limited (Nakilat) (QPSC) is:

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

0.06 = ر.ق1.9b ÷ (ر.ق35b - ر.ق2.9b) (Based on the trailing twelve months to March 2025).

Thus, Qatar Gas Transport Company Limited (Nakilat) (QPSC) has an ROCE of 6.0%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 9.1%.

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

The Trend Of ROCE

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 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. This probably explains why Qatar Gas Transport Company Limited (Nakilat) (QPSC) is paying out 46% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

The Bottom Line

In summary, Qatar Gas Transport Company Limited (Nakilat) (QPSC) isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Yet to long term shareholders the stock has gifted them an incredible 107% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One more thing, we've spotted 1 warning sign facing Qatar Gas Transport Company Limited (Nakilat) (QPSC) that you might find interesting.

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.