Saudi Aramco Base Oil Company - Luberef (TADAWUL:2223) Is Experiencing Growth In Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. So when we looked at Saudi Aramco Base Oil Company - Luberef (TADAWUL:2223) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Saudi Aramco Base Oil Company - Luberef, this is the formula:

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

0.18 = ر.س970m ÷ (ر.س8.1b - ر.س2.6b) (Based on the trailing twelve months to March 2025).

So, Saudi Aramco Base Oil Company - Luberef has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 3.8% it's much better.

Check out our latest analysis for Saudi Aramco Base Oil Company - Luberef

In the above chart we have measured Saudi Aramco Base Oil Company - Luberef's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Saudi Aramco Base Oil Company - Luberef for free.

How Are Returns Trending?

Saudi Aramco Base Oil Company - Luberef has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 99,911% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To bring it all together, Saudi Aramco Base Oil Company - Luberef has done well to increase the returns it's generating from its capital employed. Astute investors may have an opportunity here because the stock has declined 25% in the last year. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing, we've spotted 1 warning sign facing Saudi Aramco Base Oil Company - Luberef that you might find interesting.

While Saudi Aramco Base Oil Company - Luberef may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.