Nasdaq
华尔街日报Al Yamamah Steel Industries (TADAWUL:1304) Has More To Do To Multiply In Value Going Forward
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Having said that, from a first glance at Al Yamamah Steel Industries (TADAWUL:1304) 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)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Al Yamamah Steel Industries:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = ر.س114m ÷ (ر.س1.8b - ر.س825m) (Based on the trailing twelve months to September 2025).
So, Al Yamamah Steel Industries has an ROCE of 12%. In isolation, that's a pretty standard return but against the Metals and Mining industry average of 19%, it's not as good.
Check out our latest analysis for Al Yamamah Steel Industries
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'd like to look at how Al Yamamah Steel Industries has performed in the past in other metrics, you can view this free graph of Al Yamamah Steel Industries' past earnings, revenue and cash flow.
What Can We Tell From Al Yamamah Steel Industries' ROCE Trend?
Things have been pretty stable at Al Yamamah Steel Industries, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Al Yamamah Steel Industries to be a multi-bagger going forward.
On a side note, Al Yamamah Steel Industries' current liabilities are still rather high at 47% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.
The Key Takeaway
In a nutshell, Al Yamamah Steel Industries has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 27% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
One more thing, we've spotted 2 warning signs facing Al Yamamah Steel Industries that you might find interesting.
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.