Stock Analysis

Ooredoo Q.P.S.C (DSM:ORDS) Shareholders Will Want The ROCE Trajectory To Continue

DSM:ORDS
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If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Ooredoo Q.P.S.C (DSM:ORDS) looks quite promising in regards to its trends of return on capital.

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 Ooredoo Q.P.S.C is:

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

0.10 = ر.ق4.7b ÷ (ر.ق57b - ر.ق12b) (Based on the trailing twelve months to March 2023).

So, Ooredoo Q.P.S.C has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Telecom industry average of 11%.

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

roce
DSM:ORDS Return on Capital Employed May 24th 2023

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 The Trend Of ROCE Can Tell Us

We're pretty happy with how the ROCE has been trending at Ooredoo Q.P.S.C. We found that the returns on capital employed over the last five years have risen by 51%. The company is now earning ر.ق0.1 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 29% less than it was five years ago, which can be indicative of a business that's improving its efficiency. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Bottom Line On Ooredoo Q.P.S.C's ROCE

In summary, it's great to see that Ooredoo Q.P.S.C has been able to turn things around and earn higher returns on lower amounts of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 87% return over the last five years. In light of that, we think it's worth looking further into this stock because if Ooredoo Q.P.S.C can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Ooredoo Q.P.S.C, we've discovered 1 warning sign that you should be aware of.

While Ooredoo Q.P.S.C may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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.