Stock Analysis

The Returns At Ooredoo Q.P.S.C (DSM:ORDS) Aren't Growing

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There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Having said that, from a first glance at Ooredoo Q.P.S.C (DSM:ORDS) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Return On Capital Employed (ROCE): What is it?

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)

0.067 = ر.ق3.9b ÷ (ر.ق78b - ر.ق19b) (Based on the trailing twelve months to June 2021).

So, Ooredoo Q.P.S.C has an ROCE of 6.7%. In absolute terms, that's a low return and it also under-performs the Telecom industry average of 9.8%.

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

DSM:ORDS Return on Capital Employed September 20th 2021

Above you can see how the current ROCE for Ooredoo Q.P.S.C compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Ooredoo Q.P.S.C's ROCE Trending?

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. So don't be surprised if Ooredoo Q.P.S.C doesn't end up being a multi-bagger in a few years time. With fewer investment opportunities, it makes sense that Ooredoo Q.P.S.C has been paying out a decent 49% of its earnings to shareholders. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

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

In a nutshell, Ooredoo Q.P.S.C has been trudging along with the same returns from the same amount of capital over the last five years. And in the last five years, the stock has given away 13% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Ooredoo Q.P.S.C has the makings of a multi-bagger.

If you'd like to know more about Ooredoo Q.P.S.C, we've spotted 2 warning signs, and 1 of them is a bit concerning.

While Ooredoo Q.P.S.C isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.
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