Jahez International Company for Information Systems Technology (TADAWUL:9526) Is Experiencing Growth In Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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 when we looked at Jahez International Company for Information Systems Technology (TADAWUL:9526) and its trend of ROCE, we really liked what we saw.

Understanding 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. Analysts use this formula to calculate it for Jahez International Company for Information Systems Technology:

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

0.058 = ر.س64m ÷ (ر.س1.4b - ر.س299m) (Based on the trailing twelve months to December 2022).

Therefore, Jahez International Company for Information Systems Technology has an ROCE of 5.8%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 11%.

See our latest analysis for Jahez International Company for Information Systems Technology

Above you can see how the current ROCE for Jahez International Company for Information Systems Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From Jahez International Company for Information Systems Technology's ROCE Trend?

The fact that Jahez International Company for Information Systems Technology is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses three years ago, but now it's earning 5.8% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Jahez International Company for Information Systems Technology is utilizing 17,898% more capital than it was three years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 21%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Jahez International Company for Information Systems Technology has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

Our Take On Jahez International Company for Information Systems Technology's ROCE

Long story short, we're delighted to see that Jahez International Company for Information Systems Technology's reinvestment activities have paid off and the company is now profitable. Given the stock has declined 47% in the last year, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we've found 1 warning sign for Jahez International Company for Information Systems Technology that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.