Returns On Capital At SABIC Agri-Nutrients (TADAWUL:2020) Have Hit The Brakes

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at SABIC Agri-Nutrients' (TADAWUL:2020) ROCE trend, we were pretty happy with what we saw.

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What Is Return On Capital Employed (ROCE)?

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 SABIC Agri-Nutrients:

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

0.17 = ر.س4.0b ÷ (ر.س26b - ر.س2.1b) (Based on the trailing twelve months to September 2025).

Thus, SABIC Agri-Nutrients has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 5.3% it's much better.

See our latest analysis for SABIC Agri-Nutrients

In the above chart we have measured SABIC Agri-Nutrients' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering SABIC Agri-Nutrients for free.

So How Is SABIC Agri-Nutrients' ROCE Trending?

While the current returns on capital are decent, they haven't changed much. The company has employed 161% more capital in the last five years, and the returns on that capital have remained stable at 17%. 17% is a pretty standard return, and it provides some comfort knowing that SABIC Agri-Nutrients has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line

The main thing to remember is that SABIC Agri-Nutrients has proven its ability to continually reinvest at respectable rates of return. And the stock has followed suit returning a meaningful 98% to shareholders over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you'd like to know more about SABIC Agri-Nutrients, we've spotted 2 warning signs, and 1 of them doesn't sit too well with us.

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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.