Return Trends At OraSure Technologies (NASDAQ:OSUR) Aren't Appealing

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at OraSure Technologies (NASDAQ:OSUR) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for OraSure Technologies:

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

0.098 = US$43m ÷ (US$483m - US$40m) (Based on the trailing twelve months to December 2023).

Therefore, OraSure Technologies has an ROCE of 9.8%. Even though it's in line with the industry average of 9.8%, it's still a low return by itself.

Check out our latest analysis for OraSure Technologies

In the above chart we have measured OraSure Technologies' 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 OraSure Technologies .

What Can We Tell From OraSure Technologies' ROCE Trend?

In terms of OraSure Technologies' historical ROCE trend, it doesn't exactly demand attention. The company has employed 54% more capital in the last five years, and the returns on that capital have remained stable at 9.8%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From OraSure Technologies' ROCE

Long story short, while OraSure Technologies has been reinvesting its capital, the returns that it's generating haven't increased. And in the last five years, the stock has given away 30% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think OraSure Technologies has the makings of a multi-bagger.

If you want to continue researching OraSure Technologies, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.