Why We Like The Returns At Riyadh Cables Group (TADAWUL:4142)

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Riyadh Cables Group (TADAWUL:4142) looks great, so lets see what the trend can tell us.

We've discovered 2 warning signs about Riyadh Cables Group. View them for free.

What Is 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 Riyadh Cables Group is:

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

0.39 = ر.س1.1b ÷ (ر.س5.8b - ر.س3.0b) (Based on the trailing twelve months to March 2025).

So, Riyadh Cables Group has an ROCE of 39%. That's a fantastic return and not only that, it outpaces the average of 8.6% earned by companies in a similar industry.

See our latest analysis for Riyadh Cables Group

In the above chart we have measured Riyadh Cables Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Riyadh Cables Group .

What Does the ROCE Trend For Riyadh Cables Group Tell Us?

Riyadh Cables Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 39%. The amount of capital employed has increased too, by 36%. So we're very much inspired by what we're seeing at Riyadh Cables Group thanks to its ability to profitably reinvest capital.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 52% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Riyadh Cables Group has. Since the stock has returned a solid 37% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 2 warning signs facing Riyadh Cables Group that you might find interesting.

Riyadh Cables Group is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.