Will National Medical Care (TADAWUL:4005) Multiply In Value Going Forward?

There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating National Medical Care (TADAWUL:4005), we don't think it's current trends fit the mold of a multi-bagger.

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 National Medical Care, this is the formula:

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

0.093 = ر.س112m ÷ (ر.س1.4b - ر.س180m) (Based on the trailing twelve months to September 2020).

Therefore, National Medical Care has an ROCE of 9.3%. On its own that's a low return, but compared to the average of 7.2% generated by the Healthcare industry, it's much better.

View our latest analysis for National Medical Care

In the above chart we have measured National Medical Care's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

Things have been pretty stable at National Medical Care, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect National Medical Care to be a multi-bagger going forward. On top of that you'll notice that National Medical Care has been paying out a large portion (79%) of earnings in the form of dividends to shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.

Our Take On National Medical Care's ROCE

We can conclude that in regards to National Medical Care's returns on capital employed and the trends, there isn't much change to report on. Unsurprisingly, the stock has only gained 35% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

One more thing, we've spotted 1 warning sign facing National Medical Care that you might find interesting.

While National Medical Care 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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