Qatar Electricity & Water Company Q.P.S.C (DSM:QEWS) Will Be Hoping To Turn Its Returns On Capital Around

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. However, after briefly looking over the numbers, we don't think Qatar Electricity & Water Company Q.P.S.C (DSM:QEWS) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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 Electricity & Water Company Q.P.S.C, this is the formula:

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

0.033 = ر.ق709m ÷ (ر.ق23b - ر.ق2.2b) (Based on the trailing twelve months to June 2025).

Therefore, Qatar Electricity & Water Company Q.P.S.C has an ROCE of 3.3%. Ultimately, that's a low return and it under-performs the Integrated Utilities industry average of 5.3%.

View our latest analysis for Qatar Electricity & Water Company Q.P.S.C

In the above chart we have measured Qatar Electricity & Water Company Q.P.S.C's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Qatar Electricity & Water Company Q.P.S.C for free.

The Trend Of ROCE

When we looked at the ROCE trend at Qatar Electricity & Water Company Q.P.S.C, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 3.3% from 4.6% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.

What We Can Learn From Qatar Electricity & Water Company Q.P.S.C's ROCE

To conclude, we've found that Qatar Electricity & Water Company Q.P.S.C is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 21% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

On a separate note, we've found 1 warning sign for Qatar Electricity & Water Company Q.P.S.C you'll probably want to know about.

While Qatar Electricity & Water Company 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.