Investors Shouldn't Overlook Saudi Aramco Base Oil Company - Luberef's (TADAWUL:2223) Impressive Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. 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 Saudi Aramco Base Oil Company - Luberef (TADAWUL:2223) 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 Saudi Aramco Base Oil Company - Luberef, this is the formula:

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

0.28 = ر.س2.0b ÷ (ر.س9.5b - ر.س2.6b) (Based on the trailing twelve months to September 2023).

So, Saudi Aramco Base Oil Company - Luberef has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 5.6%.

Check out our latest analysis for Saudi Aramco Base Oil Company - Luberef

Above you can see how the current ROCE for Saudi Aramco Base Oil Company - Luberef 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 Saudi Aramco Base Oil Company - Luberef here for free.

What Can We Tell From Saudi Aramco Base Oil Company - Luberef's ROCE Trend?

Saudi Aramco Base Oil Company - Luberef is displaying some positive trends. The data shows that returns on capital have increased substantially over the last four years to 28%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 26%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Saudi Aramco Base Oil Company - Luberef's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Saudi Aramco Base Oil Company - Luberef has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 67% return over the last year. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know more about Saudi Aramco Base Oil Company - Luberef, we've spotted 2 warning signs, and 1 of them shouldn't be ignored.

Saudi Aramco Base Oil Company - Luberef is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.