Returns On Capital At ADES Holding (TADAWUL:2382) Have Hit The Brakes

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at ADES Holding (TADAWUL:2382) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper 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. The formula for this calculation on ADES Holding is:

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

0.097 = ر.س1.8b ÷ (ر.س22b - ر.س3.3b) (Based on the trailing twelve months to June 2025).

Thus, ADES Holding has an ROCE of 9.7%. On its own, that's a low figure but it's around the 8.4% average generated by the Energy Services industry.

Check out our latest analysis for ADES Holding

Above you can see how the current ROCE for ADES Holding 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 analyst report for ADES Holding .

What Does the ROCE Trend For ADES Holding Tell Us?

The returns on capital haven't changed much for ADES Holding in recent years. The company has consistently earned 9.7% for the last five years, and the capital employed within the business has risen 334% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

What We Can Learn From ADES Holding's ROCE

Long story short, while ADES Holding has been reinvesting its capital, the returns that it's generating haven't increased. Since the stock has declined 17% over the last year, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

One more thing to note, we've identified 1 warning sign with ADES Holding and understanding it 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.