Stock Analysis

Returns On Capital Are Showing Encouraging Signs At Ooredoo Q.P.S.C (DSM:ORDS)

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. 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.

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. To calculate this metric for Ooredoo Q.P.S.C, this is the formula:

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

0.097 = ر.ق4.4b ÷ (ر.ق60b - ر.ق14b) (Based on the trailing twelve months to September 2022).

So, Ooredoo Q.P.S.C has an ROCE of 9.7%. On its own, that's a low figure but it's around the 11% average generated by the Telecom industry.

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

roce
DSM:ORDS Return on Capital Employed February 14th 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.

How Are Returns Trending?

You'd find it hard not to be impressed with the ROCE trend at Ooredoo Q.P.S.C. The figures show that over the last five years, returns on capital have grown by 42%. 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 35% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Key Takeaway

In the end, Ooredoo Q.P.S.C has proven it's capital allocation skills are good with those higher returns from less amount of capital. Considering the stock has delivered 28% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to continue researching Ooredoo Q.P.S.C, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.