Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) Is Doing The Right Things To Multiply Its Share Price

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. 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 Dr. Sulaiman Al Habib Medical Services Group's (TADAWUL:4013) returns on capital, so let's have a look.

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. To calculate this metric for Dr. Sulaiman Al Habib Medical Services Group, this is the formula:

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

0.16 = ر.س1.8b ÷ (ر.س14b - ر.س2.8b) (Based on the trailing twelve months to June 2023).

Therefore, Dr. Sulaiman Al Habib Medical Services Group has an ROCE of 16%. That's a relatively normal return on capital, and it's around the 15% generated by the Healthcare industry.

View our latest analysis for Dr. Sulaiman Al Habib Medical Services Group

Above you can see how the current ROCE for Dr. Sulaiman Al Habib Medical Services Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Dr. Sulaiman Al Habib Medical Services Group.

So How Is Dr. Sulaiman Al Habib Medical Services Group's ROCE Trending?

The trends we've noticed at Dr. Sulaiman Al Habib Medical Services Group are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 89%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Dr. Sulaiman Al Habib Medical Services Group's ROCE

All in all, it's terrific to see that Dr. Sulaiman Al Habib Medical Services Group is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last three 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 Dr. Sulaiman Al Habib Medical Services Group can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

While Dr. Sulaiman Al Habib Medical Services Group 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.