Aldrees Petroleum and Transport Services (TADAWUL:4200) Shareholders Will Want The ROCE Trajectory To Continue

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. So on that note, Aldrees Petroleum and Transport Services (TADAWUL:4200) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Aldrees Petroleum and Transport Services is:

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

0.089 = ر.س461m ÷ (ر.س8.1b - ر.س3.0b) (Based on the trailing twelve months to June 2024).

Therefore, Aldrees Petroleum and Transport Services has an ROCE of 8.9%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 12%.

See our latest analysis for Aldrees Petroleum and Transport Services

In the above chart we have measured Aldrees Petroleum and Transport Services' 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 Aldrees Petroleum and Transport Services for free.

So How Is Aldrees Petroleum and Transport Services' ROCE Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 8.9%. The amount of capital employed has increased too, by 157%. So we're very much inspired by what we're seeing at Aldrees Petroleum and Transport Services thanks to its ability to profitably reinvest capital.

In Conclusion...

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 Aldrees Petroleum and Transport Services has. And a remarkable 344% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Aldrees Petroleum and Transport Services can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for Aldrees Petroleum and Transport Services that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.