Returns At Envista Holdings (NYSE:NVST) Appear To Be Weighed Down

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Envista Holdings (NYSE:NVST) and its ROCE trend, we weren't exactly thrilled.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Envista Holdings is:

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

0.064 = US$346m ÷ (US$6.6b - US$1.1b) (Based on the trailing twelve months to March 2023).

Therefore, Envista Holdings has an ROCE of 6.4%. In absolute terms, that's a low return and it also under-performs the Medical Equipment industry average of 9.1%.

Check out our latest analysis for Envista Holdings

Above you can see how the current ROCE for Envista Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Envista Holdings here for free.

How Are Returns Trending?

There hasn't been much to report for Envista Holdings' returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Envista Holdings doesn't end up being a multi-bagger in a few years time.

The Bottom Line On Envista Holdings' ROCE

In a nutshell, Envista Holdings has been trudging along with the same returns from the same amount of capital over the last five years. Although the market must be expecting these trends to improve because the stock has gained 56% over the last three years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you're still interested in Envista Holdings it's worth checking out our FREE intrinsic value approximation to see if it's trading at an attractive price in other respects.

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.