Slowing Rates Of Return At Mouwasat Medical Services (TADAWUL:4002) Leave Little Room For Excitement

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. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over Mouwasat Medical Services' (TADAWUL:4002) trend of ROCE, we liked what we saw.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Mouwasat Medical Services is:

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

0.19 = ر.س755m ÷ (ر.س4.9b - ر.س977m) (Based on the trailing twelve months to September 2023).

So, Mouwasat Medical Services has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Healthcare industry average of 15% it's much better.

View our latest analysis for Mouwasat Medical Services

In the above chart we have measured Mouwasat Medical Services' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Mouwasat Medical Services here for free.

What Does the ROCE Trend For Mouwasat Medical Services Tell Us?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 19% and the business has deployed 66% more capital into its operations. 19% is a pretty standard return, and it provides some comfort knowing that Mouwasat Medical Services has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On Mouwasat Medical Services' ROCE

In the end, Mouwasat Medical Services has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 241% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Mouwasat Medical Services could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

While Mouwasat Medical Services 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.