Shareholders Would Enjoy A Repeat Of Almawarid Manpower's (TADAWUL:1833) Recent Growth In Returns

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at the ROCE trend of Almawarid Manpower (TADAWUL:1833) 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. The formula for this calculation on Almawarid Manpower is:

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

0.22 = ر.س100m ÷ (ر.س712m - ر.س259m) (Based on the trailing twelve months to March 2024).

Therefore, Almawarid Manpower has an ROCE of 22%. On its own that's a fantastic return on capital, though it's the same as the Professional Services industry average of 22%.

See our latest analysis for Almawarid Manpower

Above you can see how the current ROCE for Almawarid Manpower compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Almawarid Manpower .

What Can We Tell From Almawarid Manpower's ROCE Trend?

We like the trends that we're seeing from Almawarid Manpower. The data shows that returns on capital have increased substantially over the last five years to 22%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 164%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Almawarid Manpower's ROCE

All in all, it's terrific to see that Almawarid Manpower is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 19% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Almawarid Manpower does have some risks though, and we've spotted 1 warning sign for Almawarid Manpower that you might be interested in.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com