Capital Investments At Rawasi Albina Investment (TADAWUL:9547) Point To A Promising Future

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Ergo, when we looked at the ROCE trends at Rawasi Albina Investment (TADAWUL:9547), we liked what we saw.

Understanding 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 Rawasi Albina Investment is:

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

0.28 = ر.س39m ÷ (ر.س203m - ر.س63m) (Based on the trailing twelve months to June 2023).

Therefore, Rawasi Albina Investment has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Construction industry average of 8.1%.

See our latest analysis for Rawasi Albina Investment

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 , check out these free graphs detailing revenue and cash flow performance of Rawasi Albina Investment.

What Does the ROCE Trend For Rawasi Albina Investment Tell Us?

Rawasi Albina Investment deserves to be commended in regards to it's returns. The company has employed 50% more capital in the last two years, and the returns on that capital have remained stable at 28%. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Rawasi Albina Investment can keep this up, we'd be very optimistic about its future.

What We Can Learn From Rawasi Albina Investment's ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. Yet over the last year the stock has declined 27%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

On a final note, we found 3 warning signs for Rawasi Albina Investment (1 doesn't sit too well with us) you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.