Is There More Growth In Store For Nice D&B's (KOSDAQ:130580) Returns On Capital?

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. With that in mind, we've noticed some promising trends at Nice D&B (KOSDAQ:130580) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Nice D&B is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.20 = ₩14b ÷ (₩88b - ₩18b) (Based on the trailing twelve months to September 2020).

So, Nice D&B has an ROCE of 20%. In absolute terms, that's a satisfactory return, but compared to the Professional Services industry average of 10% it's much better.

View our latest analysis for Nice D&B

Historical performance is a great place to start when researching a stock so above you can see the gauge for Nice D&B's ROCE against it's prior returns. If you're interested in investigating Nice D&B's past further, check out this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Nice D&B is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 20%. The amount of capital employed has increased too, by 122%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From Nice D&B's ROCE

To sum it up, Nice D&B has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 97% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, Nice D&B does come with some risks, and we've found 1 warning sign that you should be aware of.

While Nice D&B isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

If you’re looking to trade Nice D&B, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.