Is Gulf Warehousing Company Q.P.S.C (DSM:GWCS) Likely To Turn Things Around?

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. Although, when we looked at Gulf Warehousing Company Q.P.S.C (DSM:GWCS), it didn't seem to tick all of these boxes.

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 Gulf Warehousing Company Q.P.S.C, this is the formula:

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

0.094 = ر.ق306m ÷ (ر.ق3.8b - ر.ق569m) (Based on the trailing twelve months to June 2020).

Thus, Gulf Warehousing Company Q.P.S.C has an ROCE of 9.4%. In absolute terms, that's a low return, but it's much better than the Logistics industry average of 7.6%.

View our latest analysis for Gulf Warehousing Company Q.P.S.C

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Gulf Warehousing Company Q.P.S.C, check out these free graphs here.

What Can We Tell From Gulf Warehousing Company Q.P.S.C's ROCE Trend?

The returns on capital haven't changed much for Gulf Warehousing Company Q.P.S.C in recent years. The company has employed 70% more capital in the last five years, and the returns on that capital have remained stable at 9.4%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line

In conclusion, Gulf Warehousing Company Q.P.S.C has been investing more capital into the business, but returns on that capital haven't increased. And with the stock having returned a mere 0.9% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

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

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. 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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