We Like Mohammed Hadi Al-Rasheed's (TADAWUL:9601) Returns And Here's How They're Trending

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 when we looked at the ROCE trend of Mohammed Hadi Al-Rasheed (TADAWUL:9601) we really liked what we saw.

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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. To calculate this metric for Mohammed Hadi Al-Rasheed, this is the formula:

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

0.34 = ر.س87m ÷ (ر.س315m - ر.س59m) (Based on the trailing twelve months to December 2024).

Thus, Mohammed Hadi Al-Rasheed has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 7.8% earned by companies in a similar industry.

See our latest analysis for Mohammed Hadi Al-Rasheed

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 Mohammed Hadi Al-Rasheed has performed in the past in other metrics, you can view this free graph of Mohammed Hadi Al-Rasheed's past earnings, revenue and cash flow.

So How Is Mohammed Hadi Al-Rasheed's ROCE Trending?

We like the trends that we're seeing from Mohammed Hadi Al-Rasheed. The numbers show that in the last three years, the returns generated on capital employed have grown considerably to 34%. Basically the business is earning more per dollar of capital invested and in addition to that, 39% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

In summary, it's great to see that Mohammed Hadi Al-Rasheed can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 53% 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. Therefore, we think it would be worth your time to check if these trends are going to continue.

Mohammed Hadi Al-Rasheed does have some risks though, and we've spotted 1 warning sign for Mohammed Hadi Al-Rasheed that you might be interested in.

Mohammed Hadi Al-Rasheed 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.