Investors Will Want Aljouf Mineral Water Bottling's (TADAWUL:9532) Growth In ROCE To Persist

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Aljouf Mineral Water Bottling's (TADAWUL:9532) returns on capital, so let's have a 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. To calculate this metric for Aljouf Mineral Water Bottling, this is the formula:

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

0.051 = ر.س5.6m ÷ (ر.س214m - ر.س106m) (Based on the trailing twelve months to June 2025).

Thus, Aljouf Mineral Water Bottling has an ROCE of 5.1%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 12%.

View our latest analysis for Aljouf Mineral Water Bottling

Historical performance is a great place to start when researching a stock so above you can see the gauge for Aljouf Mineral Water Bottling's ROCE against it's prior returns. If you'd like to look at how Aljouf Mineral Water Bottling has performed in the past in other metrics, you can view this free graph of Aljouf Mineral Water Bottling's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Aljouf Mineral Water Bottling's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 61% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. 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.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 49% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

The Bottom Line

To bring it all together, Aljouf Mineral Water Bottling has done well to increase the returns it's generating from its capital employed. Investors may not be impressed by the favorable underlying trends yet because over the last three years the stock has only returned 6.8% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to know some of the risks facing Aljouf Mineral Water Bottling we've found 4 warning signs (2 make us uncomfortable!) that you should be aware of before investing here.

While Aljouf Mineral Water Bottling isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.