Why We Like The Returns At United Mining Industries (TADAWUL:9583)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at United Mining Industries' (TADAWUL:9583) look very promising so lets take a look.

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What Is 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. The formula for this calculation on United Mining Industries is:

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

0.22 = ر.س50m ÷ (ر.س359m - ر.س131m) (Based on the trailing twelve months to June 2024).

Thus, United Mining Industries has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Building industry average of 11%.

See our latest analysis for United Mining Industries

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 United Mining Industries' past further, check out this free graph covering United Mining Industries' past earnings, revenue and cash flow .

So How Is United Mining Industries' ROCE Trending?

The trends we've noticed at United Mining Industries are quite reassuring. Over the last two years, returns on capital employed have risen substantially to 22%. The amount of capital employed has increased too, by 23%. So we're very much inspired by what we're seeing at United Mining Industries thanks to its ability to profitably reinvest capital.

One more thing to note, United Mining Industries has decreased current liabilities to 37% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

Our Take On United Mining Industries' ROCE

In summary, it's great to see that United Mining Industries can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 71% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching United Mining Industries, you might be interested to know about the 4 warning signs that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.