Investors Will Want Qatar Navigation Q.P.S.C's (DSM:QNNS) Growth In ROCE To Persist

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Qatar Navigation Q.P.S.C (DSM:QNNS) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Qatar Navigation Q.P.S.C:

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

0.028 = ر.ق485m ÷ (ر.ق18b - ر.ق1.1b) (Based on the trailing twelve months to September 2022).

Therefore, Qatar Navigation Q.P.S.C has an ROCE of 2.8%. Ultimately, that's a low return and it under-performs the Shipping industry average of 11%.

See our latest analysis for Qatar Navigation Q.P.S.C

In the above chart we have measured Qatar Navigation Q.P.S.C's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Qatar Navigation Q.P.S.C Tell Us?

While there are companies with higher returns on capital out there, we still find the trend at Qatar Navigation Q.P.S.C promising. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 98% 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.

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

To bring it all together, Qatar Navigation Q.P.S.C has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 124% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

While Qatar Navigation 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.