Dr. Sulaiman Al Habib Medical Services Group's (TADAWUL:4013) Returns On Capital Are Heading Higher

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 on that note, Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) looks quite promising in regards to its trends of return on capital.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the 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)

0.17 = ر.س1.7b ÷ (ر.س12b - ر.س2.4b) (Based on the trailing twelve months to September 2022).

So, Dr. Sulaiman Al Habib Medical Services Group has an ROCE of 17%. That's a relatively normal return on capital, and it's around the 15% generated by the Healthcare industry.

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

In the above chart we have measured Dr. Sulaiman Al Habib Medical Services Group'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 Dr. Sulaiman Al Habib Medical Services Group here for free.

What Can We Tell From Dr. Sulaiman Al Habib Medical Services Group's ROCE Trend?

Dr. Sulaiman Al Habib Medical Services Group is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 17%. 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 73%. 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.

The Key Takeaway

To sum it up, Dr. Sulaiman Al Habib Medical Services Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 41% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. 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.

While Dr. Sulaiman Al Habib Medical Services Group looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 4013 is currently trading for a fair price.

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.