The Return Trends At Mouwasat Medical Services (TADAWUL:4002) Look Promising

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Mouwasat Medical Services (TADAWUL:4002) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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. To calculate this metric for Mouwasat Medical Services, this is the formula:

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

0.19 = ر.س614m ÷ (ر.س3.9b - ر.س698m) (Based on the trailing twelve months to September 2021).

Thus, Mouwasat Medical Services has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 9.5% generated by the Healthcare industry.

See 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 to see what analysts are forecasting going forward, you should check out our free report for Mouwasat Medical Services.

So How Is Mouwasat Medical Services' ROCE Trending?

We like the trends that we're seeing from Mouwasat Medical Services. Over the last five years, returns on capital employed have risen substantially to 19%. Basically the business is earning more per dollar of capital invested and in addition to that, 93% more capital is being employed now too. So we're very much inspired by what we're seeing at Mouwasat Medical Services thanks to its ability to profitably reinvest capital.

What We Can Learn From Mouwasat Medical Services' ROCE

To sum it up, Mouwasat Medical Services has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Mouwasat Medical Services can keep these trends up, it could have a bright future ahead.

While Mouwasat Medical Services looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 4002 is currently trading for a fair price.

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.