Alqemam for Computer Systems (TADAWUL:9558) Might Be Having Difficulty Using Its Capital Effectively

There are a few key trends to look for if we want to identify the next 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Alqemam for Computer Systems (TADAWUL:9558), we don't think it's current trends fit the mold of a multi-bagger.

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What Is 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. Analysts use this formula to calculate it for Alqemam for Computer Systems:

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

0.12 = ر.س10m ÷ (ر.س91m - ر.س8.0m) (Based on the trailing twelve months to December 2024).

Therefore, Alqemam for Computer Systems has an ROCE of 12%. In isolation, that's a pretty standard return but against the IT industry average of 26%, it's not as good.

See our latest analysis for Alqemam for Computer Systems

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 Alqemam for Computer Systems has performed in the past in other metrics, you can view this free graph of Alqemam for Computer Systems' past earnings, revenue and cash flow.

What Does the ROCE Trend For Alqemam for Computer Systems Tell Us?

In terms of Alqemam for Computer Systems' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 52% over the last four years. However it looks like Alqemam for Computer Systems might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On Alqemam for Computer Systems' ROCE

To conclude, we've found that Alqemam for Computer Systems is reinvesting in the business, but returns have been falling. Since the stock has declined 35% over the last year, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Alqemam for Computer Systems has the makings of a multi-bagger.

If you want to know some of the risks facing Alqemam for Computer Systems we've found 3 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.

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.