National Shipping Company of Saudi Arabia (TADAWUL:4030) Might Have The Makings Of A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So when we looked at National Shipping Company of Saudi Arabia (TADAWUL:4030) and its trend of ROCE, we really liked what we saw.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for National Shipping Company of Saudi Arabia, this is the formula:

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

0.11 = ر.س2.3b ÷ (ر.س24b - ر.س2.9b) (Based on the trailing twelve months to September 2023).

Therefore, National Shipping Company of Saudi Arabia has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.

View our latest analysis for National Shipping Company of Saudi Arabia

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of National Shipping Company of Saudi Arabia.

How Are Returns Trending?

National Shipping Company of Saudi Arabia has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 111% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

Our Take On National Shipping Company of Saudi Arabia's ROCE

To sum it up, National Shipping Company of Saudi Arabia is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 100% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. 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.

If you'd like to know about the risks facing National Shipping Company of Saudi Arabia, we've discovered 1 warning sign that you should be aware of.

While National Shipping Company of Saudi Arabia isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.