The Return Trends At Naseej International Trading (TADAWUL:1213) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Naseej International Trading (TADAWUL:1213) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Naseej International Trading:

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

0.0031 = ر.س698k ÷ (ر.س364m - ر.س137m) (Based on the trailing twelve months to June 2024).

Thus, Naseej International Trading has an ROCE of 0.3%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 8.8%.

Check out our latest analysis for Naseej International Trading

Historical performance is a great place to start when researching a stock so above you can see the gauge for Naseej International Trading's ROCE against it's prior returns. If you're interested in investigating Naseej International Trading's past further, check out this free graph covering Naseej International Trading's past earnings, revenue and cash flow.

So How Is Naseej International Trading's ROCE Trending?

It's great to see that Naseej International Trading has started to generate some pre-tax earnings from prior investments. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 0.3% on their capital employed. In regards to capital employed, Naseej International Trading is using 23% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. Naseej International Trading could be selling under-performing assets since the ROCE is improving.

One more thing to note, Naseej International Trading has decreased current liabilities to 38% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Bottom Line On Naseej International Trading's ROCE

From what we've seen above, Naseej International Trading has managed to increase it's returns on capital all the while reducing it's capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for 1213 that compares the share price and estimated value.

While Naseej International Trading may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.