We Think East Pipes Integrated Company for Industry (TADAWUL:1321) Might Have The DNA Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of East Pipes Integrated Company for Industry (TADAWUL:1321) we really liked what we saw.

What Is 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 East Pipes Integrated Company for Industry, this is the formula:

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

0.33 = ر.س326m ÷ (ر.س1.5b - ر.س501m) (Based on the trailing twelve months to March 2024).

Therefore, East Pipes Integrated Company for Industry has an ROCE of 33%. In absolute terms that's a great return and it's even better than the Metals and Mining industry average of 6.6%.

View our latest analysis for East Pipes Integrated Company for Industry

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how East Pipes Integrated Company for Industry has performed in the past in other metrics, you can view this free graph of East Pipes Integrated Company for Industry's past earnings, revenue and cash flow.

What Does the ROCE Trend For East Pipes Integrated Company for Industry Tell Us?

East Pipes Integrated Company for Industry has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 33% on its capital. Not only that, but the company is utilizing 325% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

On a related note, the company's ratio of current liabilities to total assets has decreased to 34%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Bottom Line On East Pipes Integrated Company for Industry's ROCE

To the delight of most shareholders, East Pipes Integrated Company for Industry has now broken into profitability. And a remarkable 147% total return over the last year tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know more about East Pipes Integrated Company for Industry, we've spotted 2 warning signs, and 1 of them is significant.

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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.