Saudi Arabian Mining Company (Ma'aden) (TADAWUL:1211) Is Experiencing Growth In Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Speaking of which, we noticed some great changes in Saudi Arabian Mining Company (Ma'aden)'s (TADAWUL:1211) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.067 = ر.س6.5b ÷ (ر.س115b - ر.س18b) (Based on the trailing twelve months to September 2024).

Thus, Saudi Arabian Mining Company (Ma'aden) has an ROCE of 6.7%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 14%.

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

In the above chart we have measured Saudi Arabian Mining Company (Ma'aden)'s prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Saudi Arabian Mining Company (Ma'aden) .

The Trend Of ROCE

Saudi Arabian Mining Company (Ma'aden) is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 305% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

To sum it up, Saudi Arabian Mining Company (Ma'aden) is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 294% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

While Saudi Arabian Mining Company (Ma'aden) looks impressive, no company is worth an infinite price. The intrinsic value infographic for 1211 helps visualize whether it is currently trading for a fair price.

While Saudi Arabian Mining Company (Ma'aden) 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.