Returns On Capital At Qatar Navigation Q.P.S.C (DSM:QNNS) Have Hit The Brakes

There are a few key trends to look for if we want to identify the next multi-bagger. 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. In light of that, when we looked at Qatar Navigation Q.P.S.C (DSM:QNNS) and its ROCE trend, we weren't exactly thrilled.

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. 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.ق467m ÷ (ر.ق18b - ر.ق1.4b) (Based on the trailing twelve months to September 2023).

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 8.6%.

View 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 to see what analysts are forecasting going forward, you should check out our free report for Qatar Navigation Q.P.S.C.

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

Things have been pretty stable at Qatar Navigation Q.P.S.C, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at Qatar Navigation Q.P.S.C in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger. This probably explains why Qatar Navigation Q.P.S.C is paying out 46% of its income to shareholders in the form of dividends. Given the business isn't reinvesting in itself, it makes sense to distribute a portion of earnings among shareholders.

The Bottom Line

We can conclude that in regards to Qatar Navigation Q.P.S.C's returns on capital employed and the trends, there isn't much change to report on. Since the stock has gained an impressive 72% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

Qatar Navigation Q.P.S.C could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

While Qatar Navigation Q.P.S.C may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.