Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) Is Looking To Continue Growing Its Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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)

0.15 = ر.س2.3b ÷ (ر.س19b - ر.س3.9b) (Based on the trailing twelve months to September 2024).

So, Dr. Sulaiman Al Habib Medical Services Group has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 14% generated by the Healthcare industry.

Check out 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're interested, you can view the analysts predictions in our free analyst report for Dr. Sulaiman Al Habib Medical Services Group .

What Does the ROCE Trend For Dr. Sulaiman Al Habib Medical Services Group Tell Us?

Dr. Sulaiman Al Habib Medical Services Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 15%. The amount of capital employed has increased too, by 129%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

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 Dr. Sulaiman Al Habib Medical Services Group has. Since the stock has returned a solid 87% to shareholders over the last three years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing: We've identified 2 warning signs with Dr. Sulaiman Al Habib Medical Services Group (at least 1 which is significant) , and understanding them would certainly be useful.

While Dr. Sulaiman Al Habib Medical Services Group 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.