The Returns At Naba Al Saha Medical Services (TADAWUL:9546) Aren't Growing

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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 Naba Al Saha Medical Services (TADAWUL:9546) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding 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. Analysts use this formula to calculate it for Naba Al Saha Medical Services:

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

0.18 = ر.س32m ÷ (ر.س227m - ر.س46m) (Based on the trailing twelve months to June 2023).

So, Naba Al Saha Medical Services has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 15% generated by the Healthcare industry.

Check out our latest analysis for Naba Al Saha Medical Services

Historical performance is a great place to start when researching a stock so above you can see the gauge for Naba Al Saha Medical Services' ROCE against it's prior returns. If you'd like to look at how Naba Al Saha Medical Services has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Naba Al Saha Medical Services' ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 18% for the last two years, and the capital employed within the business has risen 40% in that time. Since 18% 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 Key Takeaway

To sum it up, Naba Al Saha Medical Services has simply been reinvesting capital steadily, at those decent rates of return. And the stock has done incredibly well with a 110% return over the last year, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to continue researching Naba Al Saha Medical Services, you might be interested to know about the 2 warning signs that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.