Stock Analysis

Has Ooredoo Q.P.S.C (DSM:ORDS) Got What It Takes To Become A Multi-Bagger?

DSM:ORDS
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If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think Ooredoo Q.P.S.C (DSM:ORDS) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What is 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 Ooredoo Q.P.S.C is:

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

0.057 = ر.ق3.6b ÷ (ر.ق86b - ر.ق24b) (Based on the trailing twelve months to September 2020).

Thus, Ooredoo Q.P.S.C has an ROCE of 5.7%. In absolute terms, that's a low return and it also under-performs the Telecom industry average of 9.8%.

Check out our latest analysis for Ooredoo Q.P.S.C

roce
DSM:ORDS Return on Capital Employed January 20th 2021

In the above chart we have measured Ooredoo Q.P.S.C'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 Ooredoo Q.P.S.C here for free.

What Can We Tell From Ooredoo Q.P.S.C's ROCE Trend?

Over the past five years, Ooredoo Q.P.S.C's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Ooredoo Q.P.S.C to be a multi-bagger going forward. This probably explains why Ooredoo Q.P.S.C is paying out 60% of its income to shareholders in the form of dividends. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

What We Can Learn From Ooredoo Q.P.S.C's ROCE

We can conclude that in regards to Ooredoo Q.P.S.C's returns on capital employed and the trends, there isn't much change to report on. Unsurprisingly, the stock has only gained 34% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

On a final note, we've found 1 warning sign for Ooredoo Q.P.S.C that we think you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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