Al Masane Al Kobra Mining's (TADAWUL:1322) Returns On Capital Are Heading Higher

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Al Masane Al Kobra Mining (TADAWUL:1322) looks quite promising in regards to its trends of return on capital.

Understanding 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. Analysts use this formula to calculate it for Al Masane Al Kobra Mining:

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

0.093 = ر.س130m ÷ (ر.س1.6b - ر.س186m) (Based on the trailing twelve months to March 2023).

So, Al Masane Al Kobra Mining has an ROCE of 9.3%. In absolute terms, that's a low return but it's around the Metals and Mining industry average of 11%.

Check out our latest analysis for Al Masane Al Kobra Mining

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 Al Masane Al Kobra Mining has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Al Masane Al Kobra Mining's ROCE Trend?

The fact that Al Masane Al Kobra Mining is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 9.3% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Al Masane Al Kobra Mining is utilizing 57% more capital than it was five years ago. 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.

The Key Takeaway

To the delight of most shareholders, Al Masane Al Kobra Mining has now broken into profitability. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 12% return over the last year. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we found 2 warning signs for Al Masane Al Kobra Mining (1 doesn't sit too well with us) you should be aware of.

While Al Masane Al Kobra Mining 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.