Returns On Capital Are Showing Encouraging Signs At Vodafone Qatar P.Q.S.C (DSM:VFQS)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Speaking of which, we noticed some great changes in Vodafone Qatar P.Q.S.C's (DSM:VFQS) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for Vodafone Qatar P.Q.S.C:

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

0.12 = ر.ق674m ÷ (ر.ق7.1b - ر.ق1.5b) (Based on the trailing twelve months to March 2024).

Thus, Vodafone Qatar P.Q.S.C has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Wireless Telecom industry average of 10%.

View our latest analysis for Vodafone Qatar P.Q.S.C

Above you can see how the current ROCE for Vodafone Qatar P.Q.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 analyst report for Vodafone Qatar P.Q.S.C .

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

Vodafone Qatar P.Q.S.C's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 231% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Vodafone Qatar P.Q.S.C's ROCE

To sum it up, Vodafone Qatar P.Q.S.C is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 54% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Vodafone Qatar P.Q.S.C can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Vodafone Qatar P.Q.S.C that you might find interesting.

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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com