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华尔街日报There Are Reasons To Feel Uneasy About Al-Fakhera Men's Tailoring's (TADAWUL:9618) Returns On Capital
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Having said that, from a first glance at Al-Fakhera Men's Tailoring (TADAWUL:9618) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
Understanding 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. Analysts use this formula to calculate it for Al-Fakhera Men's Tailoring:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = ر.س17m ÷ (ر.س148m - ر.س37m) (Based on the trailing twelve months to June 2025).
Thus, Al-Fakhera Men's Tailoring has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Specialty Retail industry average of 10% it's much better.
See our latest analysis for Al-Fakhera Men's Tailoring
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Al-Fakhera Men's Tailoring.
So How Is Al-Fakhera Men's Tailoring's ROCE Trending?
In terms of Al-Fakhera Men's Tailoring's historical ROCE movements, the trend isn't fantastic. Over the last two years, returns on capital have decreased to 15% from 27% two years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.
In Conclusion...
While returns have fallen for Al-Fakhera Men's Tailoring in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. Furthermore the stock has climbed 34% over the last year, it would appear that investors are upbeat about the future. So should these growth trends continue, we'd be optimistic on the stock going forward.
Al-Fakhera Men's Tailoring does come with some risks though, we found 4 warning signs in our investment analysis, and 1 of those is potentially serious...
While Al-Fakhera Men's Tailoring 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.