Returns On Capital Are Showing Encouraging Signs At Ras Al Khaimah for White Cement & Construction Materials P.S.C (ADX:RAKWCT)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Ras Al Khaimah for White Cement & Construction Materials P.S.C (ADX:RAKWCT) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Ras Al Khaimah for White Cement & Construction Materials P.S.C:

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

0.013 = د.إ11m ÷ (د.إ883m - د.إ76m) (Based on the trailing twelve months to December 2023).

Therefore, Ras Al Khaimah for White Cement & Construction Materials P.S.C has an ROCE of 1.3%. In absolute terms, that's a low return and it also under-performs the Basic Materials industry average of 2.6%.

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

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ras Al Khaimah for White Cement & Construction Materials P.S.C's ROCE against it's prior returns. If you're interested in investigating Ras Al Khaimah for White Cement & Construction Materials P.S.C's past further, check out this free graph covering Ras Al Khaimah for White Cement & Construction Materials P.S.C's past earnings, revenue and cash flow.

What Can We Tell From Ras Al Khaimah for White Cement & Construction Materials P.S.C's ROCE Trend?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 100% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that Ras Al Khaimah for White Cement & Construction Materials P.S.C has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has only returned 14% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

While Ras Al Khaimah for White Cement & Construction Materials P.S.C looks impressive, no company is worth an infinite price. The intrinsic value infographic for RAKWCT helps visualize whether it is currently trading for a fair price.

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.