Abdulaziz and Mansour Ibrahim Albabtin (TADAWUL:9549) Has More To Do To Multiply In Value Going Forward

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. So, when we ran our eye over Abdulaziz and Mansour Ibrahim Albabtin's (TADAWUL:9549) trend of ROCE, we 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. To calculate this metric for Abdulaziz and Mansour Ibrahim Albabtin, this is the formula:

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

0.13 = ر.س8.8m ÷ (ر.س102m - ر.س36m) (Based on the trailing twelve months to June 2023).

Therefore, Abdulaziz and Mansour Ibrahim Albabtin has an ROCE of 13%. By itself that's a normal return on capital and it's in line with the industry's average returns of 13%.

View our latest analysis for Abdulaziz and Mansour Ibrahim Albabtin

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'd like to look at how Abdulaziz and Mansour Ibrahim Albabtin has performed in the past in other metrics, you can view this free graph of Abdulaziz and Mansour Ibrahim Albabtin's past earnings, revenue and cash flow.

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 164% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that Abdulaziz and Mansour Ibrahim Albabtin has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

In Conclusion...

The main thing to remember is that Abdulaziz and Mansour Ibrahim Albabtin has proven its ability to continually reinvest at respectable rates of return. However, over the last year, the stock hasn't provided much growth to shareholders in the way of total returns. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you want to continue researching Abdulaziz and Mansour Ibrahim Albabtin, you might be interested to know about the 4 warning signs that our analysis has discovered.

While Abdulaziz and Mansour Ibrahim Albabtin isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.