The Returns On Capital At International Holding Company PJSC (ADX:IHC) Don't Inspire Confidence
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at International Holding Company PJSC (ADX:IHC), it didn't seem to tick all of these boxes.
Understanding 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 International Holding Company PJSC is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.049 = د.إ18b ÷ (د.إ462b - د.إ101b) (Based on the trailing twelve months to September 2025).
Therefore, International Holding Company PJSC has an ROCE of 4.9%. Even though it's in line with the industry average of 5.0%, it's still a low return by itself.
View our latest analysis for International Holding Company PJSC
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating International Holding Company PJSC's past further, check out this free graph covering International Holding Company PJSC's past earnings, revenue and cash flow.
What Can We Tell From International Holding Company PJSC's ROCE Trend?
When we looked at the ROCE trend at International Holding Company PJSC, we didn't gain much confidence. Around five years ago the returns on capital were 19%, but since then they've fallen to 4.9%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.
On a side note, International Holding Company PJSC has done well to pay down its current liabilities to 22% of total assets. So we could link some of this to the decrease in ROCE. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.
The Bottom Line On International Holding Company PJSC's ROCE
In summary, despite lower returns in the short term, we're encouraged to see that International Holding Company PJSC is reinvesting for growth and has higher sales as a result. And long term investors must be optimistic going forward because the stock has returned a huge 882% to shareholders in the last five years. So should these growth trends continue, we'd be optimistic on the stock going forward.
Like most companies, International Holding Company PJSC does come with some risks, and we've found 2 warning signs that you should be aware of.
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.