National Company for Learning and Education (TADAWUL:4291) Is Experiencing Growth In Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in National Company for Learning and Education's (TADAWUL:4291) returns on capital, so let's have a look.

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

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 National Company for Learning and Education is:

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

0.12 = ر.س129m ÷ (ر.س1.3b - ر.س222m) (Based on the trailing twelve months to February 2024).

Therefore, National Company for Learning and Education has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.9% generated by the Consumer Services industry.

See 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 .

The Trend Of ROCE

The trends we've noticed at National Company for Learning and Education are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. Basically the business is earning more per dollar of capital invested and in addition to that, 58% more capital is being employed now too. 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.

The Key Takeaway

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 686% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing to note, we've identified 1 warning sign with National Company for Learning and Education and understanding this should be part of your investment process.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.