What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) so let's look a bit deeper.

What Is 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. To calculate this metric for Dr. Sulaiman Al Habib Medical Services Group, this is the formula:

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

0.16 = ر.س2.1b ÷ (ر.س17b - ر.س3.4b) (Based on the trailing twelve months to March 2024).

Thus, Dr. Sulaiman Al Habib Medical Services Group has an ROCE of 16%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Healthcare industry average of 14%.

In the above chart we have measured Dr. Sulaiman Al Habib Medical Services Group's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Dr. Sulaiman Al Habib Medical Services Group .

How Are Returns Trending?

We like the trends that we're seeing from Dr. Sulaiman Al Habib Medical Services Group. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 110%. So we're very much inspired by what we're seeing at Dr. Sulaiman Al Habib Medical Services Group thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that Dr. Sulaiman Al Habib Medical Services Group is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 89% to shareholders over the last three years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know more about Dr. Sulaiman Al Habib Medical Services Group, we've spotted 2 warning signs, and 1 of them makes us a bit uncomfortable.

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.