If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. First, we would like to see a proven Return on capital employed (ROCE) which is increasing, and second, an expansion Base of capital employed. This shows us that it is a compounding machine, capable of continuously rolling its earnings back into the business and generating high returns. So when we rolled our eyes Nissan International Enterprise Development Group (NASDAQ:NISN) ROCE’s trend, we loved what we saw.
Return on Capital Employed (ROCE): What is it?
If you have not worked with ROCE before, it measures the ‘returns’ (profits before tax) generated by the company from the capital invested in its business. To calculate this metric for Nissan International Enterprise Development Group, the formula is:
Return on Capital Employed = Earnings Before Interest and Taxes (EBIT) (Total Assets – Current Liabilities)
0.21 = US$38m (US$274m – US$89m) (Based on last twelve months to December 2021),
So, Nisun International Enterprise Development Group has a ROCE of 21%. Overall this is a great return and it is even better than the software industry average of 10%.
See our latest analysis for Nissan International Enterprise Development Group
Above you can see how the current ROCE for Nissan International Enterprise Development Group compares to its prior return on capital, but there’s only so much you can tell from the past. If you’re interested, you can check out our analysts’ forecasts in free Report on analyst forecasts for the company.
ROCE. trend of
We would be very pleased with the return on capital like Nissan International Enterprise Development Group. The company has consistently earned 21% over the past five years, and the capital employed within the business has grown 485% in that time. Now considering the ROCE of an attractive 21%, this combination is actually very attractive as it means the business can put money to work consistently and generate these high returns. If these trends can continue, we wouldn’t be surprised if the company has become a multi-bagger.
Nissan International Enterprise Development Group has demonstrated its efficiency by generating high returns on increasing amounts of capital employed, which we are thrilled about. What’s surprising though is that the stock has fallen 75% over the past five years, so its prospects in other areas of the business may suffer. So in light of that, we think it’s worth looking further into this stock to see if there are any areas of concern.
On a final note, we found 3 warning signs for Nissan International Enterprise Development Group (1 is important) you should be aware.
High returns are a key component to strong performance, so check out our free List of stocks earning high return on equity with solid balance sheet.
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This article by Simple Wall St. is general in nature. We only provide commentary based on historical data and analyst forecasts using an unbiased methodology and our articles are not intended to be financial advice. It does not recommend buying or selling any stock, and does not take into account your objectives, or your financial situation. We aim to bring you long-term focused analytics powered by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative content. Simple Wall St does not have a position in any of the stocks mentioned.
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