Here's What To Make Of National Company for Learning and Education's (TADAWUL:4291) Decelerating Rates Of Return

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. With that in mind, the ROCE of National Company for Learning and Education (TADAWUL:4291) looks decent, right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What Is It?

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 National Company for Learning and Education is:

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

0.11 = ر.س112m ÷ (ر.س1.3b - ر.س271m) (Based on the trailing twelve months to August 2023).

So, National Company for Learning and Education has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 9.4% generated by the Consumer Services industry.

Check out our latest analysis for National Company for Learning and Education

In the above chart we have measured National Company for Learning and Education's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for National Company for Learning and Education.

How Are Returns Trending?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 145% in that time. 11% is a pretty standard return, and it provides some comfort knowing that National Company for Learning and Education has consistently earned this amount. 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.

The Bottom Line On National Company for Learning and Education's ROCE

In the end, National Company for Learning and Education has proven its ability to adequately reinvest capital at good rates of return. And the stock has done incredibly well with a 544% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you're still interested in National Company for Learning and Education it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

While National Company for Learning and Education 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.