Saudi Arabian Mining Company (Ma'aden) (TADAWUL:1211) Has Some Way To Go To Become A Multi-Bagger

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think Saudi Arabian Mining Company (Ma'aden) (TADAWUL:1211) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. Analysts use this formula to calculate it for Saudi Arabian Mining Company (Ma'aden):

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

0.04 = ر.س3.8b ÷ (ر.س108b - ر.س14b) (Based on the trailing twelve months to September 2023).

So, Saudi Arabian Mining Company (Ma'aden) has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 11%.

See our latest analysis for Saudi Arabian Mining Company (Ma'aden)

Above you can see how the current ROCE for Saudi Arabian Mining Company (Ma'aden) 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 Saudi Arabian Mining Company (Ma'aden) here for free.

What The Trend Of ROCE Can Tell Us

There hasn't been much to report for Saudi Arabian Mining Company (Ma'aden)'s returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Saudi Arabian Mining Company (Ma'aden) in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

Our Take On Saudi Arabian Mining Company (Ma'aden)'s ROCE

In a nutshell, Saudi Arabian Mining Company (Ma'aden) has been trudging along with the same returns from the same amount of capital over the last five years. Yet to long term shareholders the stock has gifted them an incredible 146% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

One more thing to note, we've identified 1 warning sign with Saudi Arabian Mining Company (Ma'aden) and understanding this should be part of your investment process.

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.