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What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, we've noticed some promising trends at Nisun International Enterprise Development Group (NASDAQ:NISN) so let's look a bit deeper.
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. The formula for this calculation on Nisun International Enterprise Development Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = US$24m ÷ (US$316m - US$111m) (Based on the trailing twelve months to December 2023).
So, Nisun International Enterprise Development Group has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 7.6% generated by the Software industry.
View our latest analysis for Nisun International Enterprise Development Group
Historical performance is a great place to start when researching a stock so above you can see the gauge for Nisun International Enterprise Development Group's ROCE against it's prior returns. If you'd like to look at how Nisun International Enterprise Development Group has performed in the past in other metrics, you can view this free graph of Nisun International Enterprise Development Group's past earnings, revenue and cash flow.
How Are Returns Trending?
Nisun International Enterprise Development Group has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 12% which is a sight for sore eyes. Not only that, but the company is utilizing 454% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
In Conclusion...
In summary, it's great to see that Nisun International Enterprise Development Group has managed to break into profitability and is continuing to reinvest in its business. Given the stock has declined 44% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.