Slowing Rates Of Return At Abdulaziz and Mansour Ibrahim Albabtin (TADAWUL:9549) Leave Little Room For Excitement

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. That's why when we briefly looked at Abdulaziz and Mansour Ibrahim Albabtin's (TADAWUL:9549) ROCE trend, we were pretty happy with 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 Abdulaziz and Mansour Ibrahim Albabtin is:

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).

Thus, Abdulaziz and Mansour Ibrahim Albabtin has an ROCE of 13%. That's a pretty standard return and it's in line with the industry average of 13%.

Check out our latest analysis for Abdulaziz and Mansour Ibrahim Albabtin

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

The Trend Of ROCE

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 164% in that time. Since 13% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

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.

Abdulaziz and Mansour Ibrahim Albabtin does have some risks though, and we've spotted 3 warning signs for Abdulaziz and Mansour Ibrahim Albabtin that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.