Returns At National Shipping Company of Saudi Arabia (TADAWUL:4030) Are On The Way Up

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. So on that note, National Shipping Company of Saudi Arabia (TADAWUL:4030) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for National Shipping Company of Saudi Arabia:

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

0.10 = ر.س2.2b ÷ (ر.س25b - ر.س3.5b) (Based on the trailing twelve months to June 2024).

Therefore, National Shipping Company of Saudi Arabia has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 11% generated by the Oil and Gas industry.

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's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 75% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

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 staggering 140% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if National Shipping Company of Saudi Arabia can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with National Shipping Company of Saudi Arabia and understanding it should be part of your investment process.

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.