Returns Are Gaining Momentum At Mobile Telecommunications Company Saudi Arabia (TADAWUL:7030)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Speaking of which, we noticed some great changes in Mobile Telecommunications Company Saudi Arabia's (TADAWUL:7030) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Mobile Telecommunications Company Saudi Arabia:

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

0.064 = ر.س1.2b ÷ (ر.س28b - ر.س9.1b) (Based on the trailing twelve months to September 2023).

Therefore, Mobile Telecommunications Company Saudi Arabia has an ROCE of 6.4%. In absolute terms, that's a low return and it also under-performs the Wireless Telecom industry average of 10%.

Check out our latest analysis for Mobile Telecommunications Company Saudi Arabia

Above you can see how the current ROCE for Mobile Telecommunications Company Saudi Arabia compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

Mobile Telecommunications Company Saudi Arabia's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 55% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From Mobile Telecommunications Company Saudi Arabia's ROCE

To bring it all together, Mobile Telecommunications Company Saudi Arabia has done well to increase the returns it's generating from its capital employed. And with a respectable 44% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we found 4 warning signs for Mobile Telecommunications Company Saudi Arabia (2 are significant) 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.