Mesaieed Petrochemical Holding Company Q.P.S.C (DSM:MPHC) Will Be Hoping To Turn Its Returns On Capital Around

When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. Ultimately this means that the company is earning less per dollar invested and on top of that, it's shrinking its base of capital employed. On that note, looking into Mesaieed Petrochemical Holding Company Q.P.S.C (DSM:MPHC), we weren't too upbeat about how things were going.

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What Is 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. To calculate this metric for Mesaieed Petrochemical Holding Company Q.P.S.C, this is the formula:

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

0.044 = ر.ق711m ÷ (ر.ق17b - ر.ق334m) (Based on the trailing twelve months to March 2025).

Thus, Mesaieed Petrochemical Holding Company Q.P.S.C has an ROCE of 4.4%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 7.8%.

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

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Mesaieed Petrochemical Holding Company Q.P.S.C.

So How Is Mesaieed Petrochemical Holding Company Q.P.S.C's ROCE Trending?

We are a bit worried about the trend of returns on capital at Mesaieed Petrochemical Holding Company Q.P.S.C. To be more specific, the ROCE was 13% five years ago, but since then it has dropped noticeably. Meanwhile, capital employed in the business has stayed roughly the flat over the period. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Mesaieed Petrochemical Holding Company Q.P.S.C to turn into a multi-bagger.

In Conclusion...

In summary, it's unfortunate that Mesaieed Petrochemical Holding Company Q.P.S.C is generating lower returns from the same amount of capital. Investors haven't taken kindly to these developments, since the stock has declined 23% from where it was five years ago. With underlying trends that aren't great in these areas, we'd consider looking elsewhere.

One more thing to note, we've identified 2 warning signs with Mesaieed Petrochemical Holding Company Q.P.S.C and understanding these should be part of your investment process.

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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.