Should You Be Excited About Nice D&B's (KOSDAQ:130580) Returns On Capital?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, the ROCE of Nice D&B (KOSDAQ:130580) looks great, so lets see what the trend can tell us.

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

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. Analysts use this formula to calculate it for Nice D&B:

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

0.21 = ₩14b ÷ (₩87b - ₩19b) (Based on the trailing twelve months to June 2020).

Therefore, Nice D&B has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Professional Services industry average of 9.3%.

See our latest analysis for Nice D&B

In the above chart we have measured Nice D&B's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From Nice D&B's ROCE Trend?

Investors would be pleased with what's happening at Nice D&B. The data shows that returns on capital have increased substantially over the last five years to 21%. The amount of capital employed has increased too, by 128%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Nice D&B's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Nice D&B has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 70% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 1 warning sign for Nice D&B you'll probably want to know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.
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