We Like These Underlying Return On Capital Trends At Power and Water Utility Company for Jubail and Yanbu (TADAWUL:2083)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Power and Water Utility Company for Jubail and Yanbu (TADAWUL:2083) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Power and Water Utility Company for Jubail and Yanbu, this is the formula:

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

0.042 = ر.س854m ÷ (ر.س23b - ر.س2.9b) (Based on the trailing twelve months to September 2024).

Therefore, Power and Water Utility Company for Jubail and Yanbu has an ROCE of 4.2%. Ultimately, that's a low return and it under-performs the Integrated Utilities industry average of 5.8%.

View our latest analysis for Power and Water Utility Company for Jubail and Yanbu

Above you can see how the current ROCE for Power and Water Utility Company for Jubail and Yanbu compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Power and Water Utility Company for Jubail and Yanbu .

What The Trend Of ROCE Can Tell Us

While there are companies with higher returns on capital out there, we still find the trend at Power and Water Utility Company for Jubail and Yanbu promising. 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 33% 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.

Our Take On Power and Water Utility Company for Jubail and Yanbu's ROCE

In summary, we're delighted to see that Power and Water Utility Company for Jubail and Yanbu has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Given the stock has declined 17% in the last year, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

Power and Water Utility Company for Jubail and Yanbu does have some risks, we noticed 2 warning signs (and 1 which is concerning) we think you should know about.

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.