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Returns on Capital Paint A Bright Future For Abu Dhabi National Oil Company for Distribution PJSC (ADX:ADNOCDIST)

Simply Wall St · 06/13 08:18

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Abu Dhabi National Oil Company for Distribution PJSC (ADX:ADNOCDIST) looks great, so lets see what the trend can tell us.

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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. The formula for this calculation on Abu Dhabi National Oil Company for Distribution PJSC is:

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

0.31 = د.إ3.1b ÷ (د.إ18b - د.إ8.1b) (Based on the trailing twelve months to March 2025).

Therefore, Abu Dhabi National Oil Company for Distribution PJSC has an ROCE of 31%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 10%.

Check out our latest analysis for Abu Dhabi National Oil Company for Distribution PJSC

roce
ADX:ADNOCDIST Return on Capital Employed June 13th 2025

In the above chart we have measured Abu Dhabi National Oil Company for Distribution PJSC'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 Abu Dhabi National Oil Company for Distribution PJSC for free.

How Are Returns Trending?

Abu Dhabi National Oil Company for Distribution PJSC has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 30% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

On a side note, Abu Dhabi National Oil Company for Distribution PJSC's current liabilities are still rather high at 45% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

What We Can Learn From Abu Dhabi National Oil Company for Distribution PJSC's ROCE

As discussed above, Abu Dhabi National Oil Company for Distribution PJSC appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with a respectable 61% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Abu Dhabi National Oil Company for Distribution PJSC (of which 1 shouldn't be ignored!) that you should know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.