Return Trends At Ras Al Khaimah for White Cement & Construction Materials P.S.C (ADX:RAKWCT) Aren't Appealing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating Ras Al Khaimah for White Cement & Construction Materials P.S.C (ADX:RAKWCT), we don't think it's current trends fit the mold of a multi-bagger.

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 Ras Al Khaimah for White Cement & Construction Materials P.S.C is:

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

0.022 = د.إ18m ÷ (د.إ960m - د.إ129m) (Based on the trailing twelve months to June 2021).

Thus, Ras Al Khaimah for White Cement & Construction Materials P.S.C has an ROCE of 2.2%. In absolute terms, that's a low return and it also under-performs the Basic Materials industry average of 10%.

See our latest analysis for Ras Al Khaimah for White Cement & Construction Materials P.S.C

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 want to delve into the historical earnings, revenue and cash flow of Ras Al Khaimah for White Cement & Construction Materials P.S.C, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

Over the past five years, Ras Al Khaimah for White Cement & Construction Materials P.S.C's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Ras Al Khaimah for White Cement & Construction Materials P.S.C doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

In summary, Ras Al Khaimah for White Cement & Construction Materials P.S.C isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And with the stock having returned a mere 34% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

One final note, you should learn about the 3 warning signs we've spotted with Ras Al Khaimah for White Cement & Construction Materials P.S.C (including 1 which shouldn't be ignored) .

While Ras Al Khaimah for White Cement & Construction Materials P.S.C isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.
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