Returns at International Holding Company PJSC (ADX:IHC) are on the rise

There are a few key trends to look out for if we want to identify the next multi-bagger. Among other things, we will want to see two things; first, growth to return to on capital employed (ROCE) and on the other hand, an expansion of the amount capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. With this in mind, we have noticed some promising trends in PJSC International Holding Company (ADX:IHC) so let’s look a little deeper.

What is return on capital employed (ROCE)?

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. The formula for this calculation on International Holding Company PJSC is:

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

0.12 = Ï.å7.8b ÷ (ï.å89b – ï.å24b) (Based on the last twelve months to December 2021).

So, International Holding Company PJSC has a ROCE of 12%. By itself, that’s a standard yield, but it’s far better than the 5.3% generated by the food industry.

See our latest analysis for International Holding Company PJSC

ADX:IHC Return on Capital Employed May 3, 2022

Historical performance is a great starting point when researching a stock. So above you can see International Holding Company PJSC’s ROCE gauge compared to its past returns. If you want to further investigate the background of International Holding Company PJSC, check out this free chart of past profits, revenue and cash flow.

What does the ROCE trend tell us for International Holding Company PJSC?

The fact that International Holding Company PJSC is now generating pre-tax profits on its past investments is very encouraging. The shareholders would no doubt be delighted because the company was loss-making three years ago but now generates 12% of its capital. Not only that, but the company is using 10,118% more capital than before, but that’s to be expected of a company trying to become profitable. This can tell us that the business has plenty of reinvestment opportunities that can generate higher returns.

The essential

Long story short, we are pleased to see that International Holding Company PJSC’s reinvestment activities have paid off and the business is now profitable. And a remarkable total return of 140% over the past year tells us that investors expect more good things to come. Therefore, we think it would be worth checking whether these trends will continue.

On a separate note, we found 2 warning signs for International Holding Company PJSC you will probably want to know more.

For those who like to invest in solid companies, look at this free list of companies with strong balance sheets and high returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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