Capital Investments At NICE Information Service (KRX:030190) Point To A Promising Future

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of NICE Information Service (KRX:030190) looks attractive right now, so lets see what the trend of returns can tell us.

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Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for NICE Information Service:

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

0.20 = ₩87b ÷ (₩586b - ₩144b) (Based on the trailing twelve months to December 2024).

So, NICE Information Service has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Professional Services industry average of 11%.

Check out our latest analysis for NICE Information Service

In the above chart we have measured NICE Information Service'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 analyst report for NICE Information Service .

What Does the ROCE Trend For NICE Information Service Tell Us?

We'd be pretty happy with returns on capital like NICE Information Service. The company has employed 86% more capital in the last five years, and the returns on that capital have remained stable at 20%. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.

The Bottom Line On NICE Information Service's ROCE

In short, we'd argue NICE Information Service has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. However, despite the favorable fundamentals, the stock has fallen 14% over the last five years, so there might be an opportunity here for astute investors. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for A030190 that compares the share price and estimated value.

NICE Information Service is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.