The return on capital of Al Masane Al Kobra Mining (TADAWUL:1322) is rising

If you’re not sure where to start when looking for the next multi-bagger, there are a few key trends to look out for. In a perfect world, we would like a company to invest more capital into its business and ideally the returns earned on that capital also increase. In effect, it means that a company has profitable initiatives in which it can continue to reinvest, which is a hallmark of a food processor. So at that point, Al Masane Al Kobra Mining (TADAWUL:1322) looks promising in terms of return on capital trends.

Understand return on capital employed (ROCE).

For those unsure what ROCE is, it measures the amount of pre-tax profit a company can generate from the capital used in its business. Analysts use this formula to calculate it for Al Masane Al Kobra Mining:

Return on capital employed = earnings before interest and tax (EBIT) ÷ (total assets – current liabilities)

0.093 = ر.س130m ÷ (ر.س1.6b – ر.س186m) (Based on the last twelve months to March 2023).

So, Al Masane Al Kobra Mining has a ROCE of 9.3%. In absolute terms, that’s a low return, but it’s around the metals and mining industry average of 11%.

Check out our latest analysis for Al Masane Al Kobra Mining

SASE:1322 Return on capital employed July 5, 2023

While the past is not representative of the future, it can be helpful to know how a company has performed in the past. That’s why we have this chart above. If you want to see how Al Masane Al Kobra Mining has performed in other stats in the past, check this out free graph of past earnings, earnings and cash flow.

What can we see from the ROCE trend of Al Masane Al Kobra Mining?

The fact that Al Masane Al Kobra Mining is now generating some pre-tax profits from its previous investments is very encouraging. The company posted losses five years ago, but now it is earning 9.3%, which is a sight to behold. And unsurprisingly, Al Masane Al Kobra Mining, like most companies trying to break in, is using 57% more capital than it did five years ago. We like this trend because it tells us that the company has profitable reinvestment opportunities at its disposal, and if it continues in the future, it could lead to multi-dredging performance.

The main takeaway

To the delight of most shareholders, Al Masane Al Kobra Mining has now become profitable. And investors seem to expect more of this in the future as the stock has rewarded shareholders with a 12% return over the past year. That said, we still think the promising fundamentals mean the company deserves further due diligence.

On a final note, we loved it 2 warning signs for Al Masane Al Kobra Mining (1 is not so comfortable with us) that you have to take into account.

While Al Masane Al Kobra Mining may not be earning the highest returns right now, we’ve put together a list of companies that are currently earning more than 25% return on equity. Check this out free list here.

Valuation is complex, but we help make it simple.

Find out if Al Masane Al Kobra Mining may be over or undervalued by reviewing our comprehensive analysis, including fair value estimates, risks and cautions, dividends, insider trading and financial health.

View the free analysis

This Simply Wall St article is general in nature. We only comment based on historical data and analyst forecasts using an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. We aim to provide you with long-term focused analytics driven by fundamental data. Please note that our analysis may not take into account the latest price sensitive company announcements or quality material. Simply Wall St has no exposure to the listed stocks.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *