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Monday, March 20, 2023

Abu Dhabi Ports Company PJSC (ADX: ADPORTS ) returns appear to be subdued

Finding a business with the potential to grow significantly isn’t easy, but it’s possible if we look at some key financial metrics.First, we want to see a proven return Increased Capital Employed (ROCE), Second, Expansion according to capital employed. If you see this, it usually means it’s a company with a sound business model and plenty of profitable reinvestment opportunities.However, after a brief review of these figures, we do not think Abu Dhabi Ports Company PJSC (ADX: ADPORTS) with future multiple bagging conditions, but let’s see why this is the case.

What is Return on Capital Employed (ROCE)?

For those who aren’t sure what ROCE is, it measures the amount of pre-tax profit a company can generate from the capital employed in its business. The calculation formula of Abu Dhabi Ports Company PJSC is:

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

0.04 = $1.3b ÷ ($37b – $3.4b) (Based on last twelve months to September 2022).

so, Abu Dhabi Ports Company PJSC has a ROCE of 4.0%. Ultimately, this is a low return, below the infrastructure industry average of 6.2%.

Check out our latest analysis for Abu Dhabi Ports Company PJSC

ADX: ADPORTS Return on Capital Employed Feb 8, 2023

In the chart above, we measure Abu Dhabi Ports’ PJSC’s previous ROCE against its previous performance, but arguably the future is more important.If you are interested, you can view analyst forecasts on our website free Reports on analyst forecasts for companies.

What can we see from Abu Dhabi Ports Company PJSC’s ROCE trends?

Compared to what we saw with Abu Dhabi Ports Company PJSC, the returns on capital there are higher. The company has increased capital employed by 96% over the past three years, with a steady 4.0% return on capital. This poor ROCE doesn’t inspire confidence right now, and with the capital employed, it’s clear that the business isn’t deploying capital into high return investments.

Our take on Abu Dhabi Ports Company PJSC’s ROCE

In conclusion, Abu Dhabi Ports Company PJSC has been reinvesting capital, generating the same low rate of return as before. Though the market is certainly expecting those trends to improve, as the stock is up 61% in the last year. Ultimately, if the underlying trend persists, we wouldn’t hold our breath thinking it will be a future all-rounder.

One more thing to note, we have established that 1 warning sign with Abu Dhabi Ports Company PJSC Understanding it should be part of your investing process.

While Abu Dhabi Ports Company PJSC may not be offering the highest rate of return right now, we have compiled a list of companies that currently have a return on equity of over 25%.check it out free List here.

Valuation is complicated, but we’re helping make it simple.

Find out if Abu Dhabi Ports Company PJSC is likely to be overvalued or undervalued by reviewing our comprehensive analysis which includes Fair value estimates, risks and caveats, dividends, insider trading and financial health.

View free analysis

This article by Simply Wall St is general in nature. We use only an unbiased methodology to provide reviews based on historical data and analyst forecasts, 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 into account your objectives or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any of the stocks mentioned.

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