Q & M Dental Group (Singapore)'s (SGX:QC7) Returns On Capital Are Heading Higher

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Q & M Dental Group (Singapore) (SGX:QC7) looks quite promising in regards to its trends of return on capital.

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 Q & M Dental Group (Singapore), this is the formula:

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

0.086 = S$20m ÷ (S$260m - S$31m) (Based on the trailing twelve months to June 2023).

Therefore, Q & M Dental Group (Singapore) has an ROCE of 8.6%. On its own, that's a low figure but it's around the 9.6% average generated by the Healthcare industry.

Check out our latest analysis for Q & M Dental Group (Singapore)

In the above chart we have measured Q & M Dental Group (Singapore)'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 report for Q & M Dental Group (Singapore).

So How Is Q & M Dental Group (Singapore)'s ROCE Trending?

Q & M Dental Group (Singapore)'s ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 53% in that same time. 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. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On Q & M Dental Group (Singapore)'s ROCE

To bring it all together, Q & M Dental Group (Singapore) has done well to increase the returns it's generating from its capital employed. Astute investors may have an opportunity here because the stock has declined 37% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Q & M Dental Group (Singapore), you might be interested to know about the 4 warning signs that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.