We Like These Underlying Return On Capital Trends At Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. 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.

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. Analysts use this formula to calculate it for Dr. Sulaiman Al Habib Medical Services Group:

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

0.16 = ر.س2.0b ÷ (ر.س15b - ر.س3.0b) (Based on the trailing twelve months to September 2023).

Thus, 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.

See 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.

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

We like the trends that we're seeing from Dr. Sulaiman Al Habib Medical Services Group. The data shows that returns on capital have increased substantially over the last five years to 16%. Basically the business is earning more per dollar of capital invested and in addition to that, 100% more capital is being employed now too. 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 Bottom Line On Dr. Sulaiman Al Habib Medical Services Group's ROCE

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 staggering 142% to shareholders over the last three years, it looks like investors are recognizing these changes. 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 a separate note, we've found 1 warning sign for Dr. Sulaiman Al Habib Medical Services Group you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.