Is Aseer Buying and selling Tourism and Manufacturing (TADAWUL:4080) Struggling?

What are the underlying trends that tell us that if you ignore a company’s share price, a company is out of growth? Typically, the trend towards a decrease in return on investment (ROCE) will decrease, which usually coincides with a decrease in capital employed. This shows that the company is not increasing shareholder wealth because returns are falling and the net asset base is shrinking. So after a look at the trends inside Aseer commercial tourism and production ((TADAWUL: 4080) we weren’t too hopeful.

What is return on capital employed (ROCE)?

For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (rate of return) in relation to the capital employed in the company. The formula for this calculation for Aseer Trading Tourism and Manufacturing is:

Return on investment = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.036 = س.س 85 m ÷ (ر.س 3.1 b – ر.س 750 m) (based on the last twelve months up to September 2020).

So, Aseer Trading Tourism and Manufacturing has a ROCE of 3.6%. Ultimately, this is a low return and is below the food industry average of 5.3%.

Check out our latest analysis for Aseer Trading Tourism and Manufacturing

SASE: 4080 return on investment March 8, 2021

Historical performance is a good place to start when studying a stock, so above you can see the measure of Aseer Trading Tourism and Manufacturing’s ROCE based on previous returns. If you want to dig into the historical earnings, earnings, and cash flow of Aseer Trading Tourism and Manufacturing, be sure to read this one free Graphics here.

The ROCE trend

The trend in returns that Aseer Trading Tourism and Manufacturing is realizing is cause for concern. The company generated 5.1% of its capital five years ago, but has fallen noticeably since then. In addition, the company uses 38% less capital in its business operations. The combination of lower ROCE and less capital employed can indicate that a company is likely to face competitive headwinds or erosion of its moat. Typically, companies that exhibit these characteristics are not the ones that will proliferate over the long term because, statistically speaking, they have already passed the growth phase of their life cycle.

The conclusion on the ROCE of Aseer Trading Tourism and Manufacturing

In conclusion, it is unfortunate that Aseer Trading Tourism and Manufacturing is shrinking its capital base and also seeing lower returns. Despite the underlying trends, the stock has actually gained 23% over the past five years, so investors may expect the trends to reverse. Either way, we’re not big fans of the current trends and so we think you may find better investments elsewhere.

If you want to learn more about Aseer Trading Tourism and Manufacturing, we’ve discovered 2 warning signs, and 1 of them cannot be ignored.

While Aseer Trading Tourism and Manufacturing doesn’t get the highest return on investment, this is something you should check out free List of companies that generate high returns on equity with solid balance sheets.

Funded
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This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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