Al Masane Al Kobra Mining (TADAWUL:1322) Shareholders Will Want The ROCE Trajectory To Continue

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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 Al Masane Al Kobra Mining's (TADAWUL:1322) returns on capital, so let's have a look.

Understanding 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. To calculate this metric for Al Masane Al Kobra Mining, this is the formula:

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

0.042 = ر.س55m ÷ (ر.س1.5b - ر.س144m) (Based on the trailing twelve months to December 2023).

Thus, Al Masane Al Kobra Mining has an ROCE of 4.2%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 6.5%.

View our latest analysis for Al Masane Al Kobra Mining

Above you can see how the current ROCE for Al Masane Al Kobra Mining 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 Al Masane Al Kobra Mining for free.

What The Trend Of ROCE Can Tell Us

We're delighted to see that Al Masane Al Kobra Mining is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 4.2% on its capital. In addition to that, Al Masane Al Kobra Mining is employing 46% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In Conclusion...

Overall, Al Masane Al Kobra Mining gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And with a respectable 14% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Al Masane Al Kobra Mining can keep these trends up, it could have a bright future ahead.

On a final note, we found 2 warning signs for Al Masane Al Kobra Mining (1 can't be ignored) you should be aware of.

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.