The Returns At Theeb Rent A Car (TADAWUL:4261) Aren't Growing

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. With that in mind, the ROCE of Theeb Rent A Car (TADAWUL:4261) looks decent, right now, so lets see what the trend of returns can tell us.

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. 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)

0.19 = ر.س235m ÷ (ر.س1.9b - ر.س696m) (Based on the trailing twelve months to March 2023).

So, Theeb Rent A Car has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 5.4% generated by the Transportation industry.

View 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 here for free.

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. Over the past three years, ROCE has remained relatively flat at around 19% and the business has deployed 49% more capital into its operations. 19% is a pretty standard return, and it provides some comfort knowing that Theeb Rent A Car has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Theeb Rent A Car's ROCE

The main thing to remember is that Theeb Rent A Car has proven its ability to continually reinvest at respectable rates of return. And the stock has followed suit returning a meaningful 50% to shareholders over the last year. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Theeb Rent A Car (of which 1 is potentially serious!) that you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.