Mesaieed Petrochemical Holding Company Q.P.S.C (DSM:MPHC) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. So when we looked at Mesaieed Petrochemical Holding Company Q.P.S.C (DSM:MPHC) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Mesaieed Petrochemical Holding Company Q.P.S.C is:

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

0.10 = ر.ق1.7b ÷ (ر.ق17b - ر.ق309m) (Based on the trailing twelve months to September 2021).

So, Mesaieed Petrochemical Holding Company Q.P.S.C has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 11% generated by the Chemicals industry.

Check out our latest analysis for Mesaieed Petrochemical Holding Company Q.P.S.C

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mesaieed Petrochemical Holding Company Q.P.S.C's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Mesaieed Petrochemical Holding Company Q.P.S.C, check out these free graphs here.

What Does the ROCE Trend For Mesaieed Petrochemical Holding Company Q.P.S.C Tell Us?

Mesaieed Petrochemical Holding Company Q.P.S.C's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 59% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Mesaieed Petrochemical Holding Company Q.P.S.C's ROCE

To sum it up, Mesaieed Petrochemical Holding Company Q.P.S.C is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 94% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

While Mesaieed Petrochemical Holding Company Q.P.S.C looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MPHC is currently trading for a fair price.

While Mesaieed Petrochemical Holding Company Q.P.S.C 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.