Filling and Packing Materials Manufacturing (TADAWUL:2180) Might Have The Makings Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Filling and Packing Materials Manufacturing (TADAWUL:2180) looks quite promising in regards to its trends of return on capital.

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 Filling and Packing Materials Manufacturing, this is the formula:

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

0.065 = ر.س13m ÷ (ر.س292m - ر.س86m) (Based on the trailing twelve months to June 2023).

Therefore, Filling and Packing Materials Manufacturing has an ROCE of 6.5%. Ultimately, that's a low return and it under-performs the Packaging industry average of 11%.

View our latest analysis for Filling and Packing Materials Manufacturing

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 want to delve into the historical earnings, revenue and cash flow of Filling and Packing Materials Manufacturing, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

Filling and Packing Materials Manufacturing 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 137% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On Filling and Packing Materials Manufacturing's ROCE

In summary, we're delighted to see that Filling and Packing Materials Manufacturing has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has only returned 26% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Filling and Packing Materials Manufacturing does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.