The Returns At Qatar Electricity & Water Company Q.P.S.C (DSM:QEWS) Aren't Growing

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. 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.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Qatar Electricity & Water Company Q.P.S.C is:

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

0.044 = ر.ق886m ÷ (ر.ق23b - ر.ق2.8b) (Based on the trailing twelve months to September 2024).

Thus, Qatar Electricity & Water Company Q.P.S.C has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Integrated Utilities industry average of 5.5%.

Check out 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 to see what analysts are forecasting going forward, you should check out our free analyst report for Qatar Electricity & Water Company Q.P.S.C .

The Trend Of ROCE

There are better returns on capital out there than what we're seeing at Qatar Electricity & Water Company Q.P.S.C. The company has consistently earned 4.4% for the last five years, and the capital employed within the business has risen 44% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

In Conclusion...

In summary, Qatar Electricity & Water Company Q.P.S.C has simply been reinvesting capital and generating the same low rate of return as before. And investors may be recognizing these trends since the stock has only returned a total of 26% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

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

While Qatar Electricity & Water Company 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.