Returns On Capital At Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) Have Stalled

What trends should we look for it we want to identify stocks that can 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding Return On Capital Employed (ROCE)

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.س1.4b ÷ (ر.س10b - ر.س1.9b) (Based on the trailing twelve months to September 2021).

Thus, Dr. Sulaiman Al Habib Medical Services Group has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Healthcare industry average of 9.5% it's much better.

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, you can check out the forecasts from the analysts covering Dr. Sulaiman Al Habib Medical Services Group here for free.

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

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 60% more capital in the last five years, and the returns on that capital have remained stable at 17%. Since 17% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On Dr. Sulaiman Al Habib Medical Services Group's ROCE

To sum it up, Dr. Sulaiman Al Habib Medical Services Group has simply been reinvesting capital steadily, at those decent rates of return. Therefore it's no surprise that shareholders have earned a respectable 58% return if they held over the last year. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Dr. Sulaiman Al Habib Medical Services Group could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

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.