Here's What's Concerning About DISH Network's (NASDAQ:DISH) Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. However, after investigating DISH Network (NASDAQ:DISH), we don't think it's current trends fit the mold of a multi-bagger.

What Is 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 DISH Network:

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

0.055 = US$2.4b ÷ (US$49b - US$5.9b) (Based on the trailing twelve months to September 2022).

So, DISH Network has an ROCE of 5.5%. Ultimately, that's a low return and it under-performs the Media industry average of 8.9%.

Check out our latest analysis for DISH Network

In the above chart we have measured DISH Network's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering DISH Network here for free.

So How Is DISH Network's ROCE Trending?

When we looked at the ROCE trend at DISH Network, we didn't gain much confidence. Around five years ago the returns on capital were 8.9%, but since then they've fallen to 5.5%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.

What We Can Learn From DISH Network's ROCE

To conclude, we've found that DISH Network is reinvesting in the business, but returns have been falling. And investors appear hesitant that the trends will pick up because the stock has fallen 70% in the last five years. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

Like most companies, DISH Network does come with some risks, and we've found 3 warning signs that you should be aware of.

While DISH Network may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.