The Return Trends At Leejam Sports (TADAWUL:1830) Look Promising

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Leejam Sports' (TADAWUL:1830) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Leejam Sports is:

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

0.18 = ر.س481m ÷ (ر.س3.8b - ر.س1.1b) (Based on the trailing twelve months to September 2024).

Thus, Leejam Sports has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 11% generated by the Hospitality industry.

Check out our latest analysis for Leejam Sports

Above you can see how the current ROCE for Leejam Sports compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Leejam Sports for free.

So How Is Leejam Sports' ROCE Trending?

Investors would be pleased with what's happening at Leejam Sports. The data shows that returns on capital have increased substantially over the last five years to 18%. The amount of capital employed has increased too, by 38%. So we're very much inspired by what we're seeing at Leejam Sports thanks to its ability to profitably reinvest capital.

Our Take On Leejam Sports' ROCE

In summary, it's great to see that Leejam Sports can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 156% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you'd like to know more about Leejam Sports, we've spotted 2 warning signs, and 1 of them is concerning.

While Leejam Sports 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.