Qatar Navigation Q.P.S.C (DSM:QNNS) Might Have The Makings Of A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Qatar Navigation Q.P.S.C (DSM:QNNS) 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 Qatar Navigation Q.P.S.C, this is the formula:

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

0.027 = ر.ق478m ÷ (ر.ق19b - ر.ق1.2b) (Based on the trailing twelve months to September 2024).

Therefore, Qatar Navigation Q.P.S.C has an ROCE of 2.7%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 8.4%.

Check out our latest analysis for Qatar Navigation Q.P.S.C

Above you can see how the current ROCE for Qatar Navigation 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'd like, you can check out the forecasts from the analysts covering Qatar Navigation Q.P.S.C for free.

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

While there are companies with higher returns on capital out there, we still find the trend at Qatar Navigation Q.P.S.C promising. The figures show that over the last five years, ROCE has grown 23% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

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

As discussed above, Qatar Navigation Q.P.S.C appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the stock has returned a staggering 122% 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 for QNNS 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.