Stock Analysis

Investors Will Want Ooredoo Q.P.S.C's (DSM:ORDS) Growth In ROCE To Persist

DSM:ORDS
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There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Ooredoo Q.P.S.C (DSM:ORDS) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Ooredoo Q.P.S.C:

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

0.10 = ر.ق4.7b ÷ (ر.ق61b - ر.ق15b) (Based on the trailing twelve months to June 2022).

Thus, Ooredoo 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 Telecom industry.

View our latest analysis for Ooredoo Q.P.S.C

roce
DSM:ORDS Return on Capital Employed October 18th 2022

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Ooredoo Q.P.S.C Tell Us?

Ooredoo Q.P.S.C has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 45%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Ooredoo Q.P.S.C appears to been achieving more with less, since the business is using 34% less capital to run its operation. Ooredoo Q.P.S.C may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

Our Take On Ooredoo Q.P.S.C's ROCE

In a nutshell, we're pleased to see that Ooredoo Q.P.S.C has been able to generate higher returns from less capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 30% to shareholders. So with that in mind, we think the stock deserves further research.

On a final note, we found 3 warning signs for Ooredoo Q.P.S.C (1 can't be ignored) you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Ooredoo Q.P.S.C is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.