Returns At Development Works Food (TADAWUL:6013) Are On The Way Up

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Development Works Food's (TADAWUL:6013) returns on capital, so let's have a look.

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Understanding 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 Development Works Food, this is the formula:

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

0.081 = ر.س3.5m ÷ (ر.س75m - ر.س32m) (Based on the trailing twelve months to March 2025).

Therefore, Development Works Food has an ROCE of 8.1%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 15%.

View our latest analysis for Development Works Food

Historical performance is a great place to start when researching a stock so above you can see the gauge for Development Works Food's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Development Works Food.

What The Trend Of ROCE Can Tell Us

You'd find it hard not to be impressed with the ROCE trend at Development Works Food. We found that the returns on capital employed over the last five years have risen by 78%. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. Interestingly, the business may be becoming more efficient because it's applying 59% less capital than it was five years ago. Development Works Food may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 43% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. And with current liabilities at those levels, that's pretty high.

The Bottom Line On Development Works Food's ROCE

In summary, it's great to see that Development Works Food has been able to turn things around and earn higher returns on lower amounts of capital. And a remarkable 104% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

Development Works Food does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is significant...

While Development Works Food 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.