Returns On Capital At National Shipping Company of Saudi Arabia (TADAWUL:4030) Paint A Concerning Picture

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. In light of that, when we looked at National Shipping Company of Saudi Arabia (TADAWUL:4030) and its ROCE trend, we weren't exactly thrilled.

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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)

0.075 = ر.س1.9b ÷ (ر.س29b - ر.س3.3b) (Based on the trailing twelve months to September 2025).

Thus, National Shipping Company of Saudi Arabia has an ROCE of 7.5%. In absolute terms, that's a low return but it's around the Oil and Gas industry average of 8.1%.

Check out 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'd like to look at how National Shipping Company of Saudi Arabia has performed in the past in other metrics, you can view this free graph of National Shipping Company of Saudi Arabia's past earnings, revenue and cash flow.

So How Is National Shipping Company of Saudi Arabia's ROCE Trending?

On the surface, the trend of ROCE at National Shipping Company of Saudi Arabia doesn't inspire confidence. To be more specific, ROCE has fallen from 11% over the last five years. However it looks like National Shipping Company of Saudi Arabia might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

What We Can Learn From National Shipping Company of Saudi Arabia's ROCE

Bringing it all together, while we're somewhat encouraged by National Shipping Company of Saudi Arabia's reinvestment in its own business, we're aware that returns are shrinking. Although the market must be expecting these trends to improve because the stock has gained 97% over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

One final note, you should learn about the 3 warning signs we've spotted with National Shipping Company of Saudi Arabia (including 1 which shouldn't be ignored) .

While National Shipping Company of Saudi Arabia 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.