The Return Trends At Dallah Healthcare (TADAWUL:4004) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. So on that note, Dallah Healthcare (TADAWUL:4004) looks quite promising in regards to its trends of return on capital.

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 Dallah Healthcare, this is the formula:

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

0.11 = ر.س556m ÷ (ر.س6.4b - ر.س1.2b) (Based on the trailing twelve months to June 2024).

So, Dallah Healthcare has an ROCE of 11%. In isolation, that's a pretty standard return but against the Healthcare industry average of 14%, it's not as good.

Check out our latest analysis for Dallah Healthcare

In the above chart we have measured Dallah Healthcare's 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 Dallah Healthcare for free.

What The Trend Of ROCE Can Tell Us

Dallah Healthcare is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 114% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Dallah Healthcare's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Dallah Healthcare has. 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 Dallah Healthcare can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Dallah Healthcare and understanding this should be part of your investment process.

While Dallah Healthcare 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.