Be Wary Of Theeb Rent A Car (TADAWUL:4261) And Its Returns On Capital

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. 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 Theeb Rent A Car (TADAWUL:4261), we don't think it's current trends fit the mold of a multi-bagger.

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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. The formula for this calculation on Theeb Rent A Car is:

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

0.15 = ر.س269m ÷ (ر.س2.8b - ر.س1.0b) (Based on the trailing twelve months to March 2025).

Therefore, Theeb Rent A Car has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Transportation industry average of 14%.

Check out our latest analysis for Theeb Rent A Car

Above you can see how the current ROCE for Theeb Rent A Car 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 Theeb Rent A Car for free.

How Are Returns Trending?

When we looked at the ROCE trend at Theeb Rent A Car, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 15% from 21% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line On Theeb Rent A Car's ROCE

While returns have fallen for Theeb Rent A Car in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. In light of this, the stock has only gained 22% over the last three years. So this stock may still be an appealing investment opportunity, if other fundamentals prove to be sound.

One final note, you should learn about the 2 warning signs we've spotted with Theeb Rent A Car (including 1 which is significant) .

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.