The Returns At Qatar Gas Transport Company Limited (Nakilat) (QPSC) (DSM:QGTS) Aren't Growing

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. 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.

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.ق34b - ر.ق2.4b) (Based on the trailing twelve months to September 2024).

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 9.3%.

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

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

Things have been pretty stable at Qatar Gas Transport Company Limited (Nakilat) (QPSC), with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. 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. This probably explains why Qatar Gas Transport Company Limited (Nakilat) (QPSC) is paying out 58% 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 On Qatar Gas Transport Company Limited (Nakilat) (QPSC)'s ROCE

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. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 104% gain to shareholders who have held over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to continue researching Qatar Gas Transport Company Limited (Nakilat) (QPSC), you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.