Investors Will Want National Company for Learning and Education's (TADAWUL:4291) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, National Company for Learning and Education (TADAWUL:4291) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for National Company for Learning and Education, this is the formula:

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

0.17 = ر.س194m ÷ (ر.س1.3b - ر.س164m) (Based on the trailing twelve months to July 2024).

Thus, National Company for Learning and Education has an ROCE of 17%. By itself that's a normal return on capital and it's in line with the industry's average returns of 17%.

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

Above you can see how the current ROCE for National Company for Learning and Education compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for National Company for Learning and Education .

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from National Company for Learning and Education. Over the last five years, returns on capital employed have risen substantially to 17%. The amount of capital employed has increased too, by 67%. So we're very much inspired by what we're seeing at National Company for Learning and Education thanks to its ability to profitably reinvest capital.

Our Take On National Company for Learning and Education's ROCE

In summary, it's great to see that National Company for Learning and Education 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. And a remarkable 314% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we've found 1 warning sign for National Company for Learning and Education that we think you should be aware of.

While National Company for Learning and Education 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.