Investors Shouldn't Overlook Shalfa Facilities Management's (TADAWUL:9613) Impressive Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. With that in mind, the ROCE of Shalfa Facilities Management (TADAWUL:9613) looks great, so lets see what the trend can tell us.

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What Is 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. To calculate this metric for Shalfa Facilities Management, this is the formula:

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

0.28 = ر.س36m ÷ (ر.س324m - ر.س195m) (Based on the trailing twelve months to June 2025).

Therefore, Shalfa Facilities Management has an ROCE of 28%. In absolute terms that's a very respectable return and compared to the Commercial Services industry average of 24% it's pretty much on par.

See our latest analysis for Shalfa Facilities Management

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 Shalfa Facilities Management.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at Shalfa Facilities Management. The numbers show that in the last three years, the returns generated on capital employed have grown considerably to 28%. 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 116%. So we're very much inspired by what we're seeing at Shalfa Facilities Management 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. The current liabilities has increased to 60% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

The Key Takeaway

To sum it up, Shalfa Facilities Management has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 33% over the last year, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

Shalfa Facilities Management does have some risks, we noticed 4 warning signs (and 3 which shouldn't be ignored) we think you should know about.

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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.