Investors Could Be Concerned With DISH Network's (NASDAQ:DISH) Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at DISH Network (NASDAQ:DISH), it didn't seem to tick all of these boxes.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on DISH Network is:

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

0.018 = US$863m ÷ (US$54b - US$5.8b) (Based on the trailing twelve months to September 2023).

Thus, DISH Network has an ROCE of 1.8%. In absolute terms, that's a low return and it also under-performs the Media industry average of 8.2%.

See 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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From DISH Network's ROCE Trend?

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 8.2%, but since then they've fallen to 1.8%. However it looks like DISH Network might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line

To conclude, we've found that DISH Network is reinvesting in the business, but returns have been falling. Moreover, since the stock has crumbled 88% over the last five years, it appears investors are expecting the worst. Therefore based on the analysis done in this article, we don't think DISH Network has the makings of a multi-bagger.

One final note, you should learn about the 4 warning signs we've spotted with DISH Network (including 2 which don't sit too well with us) .

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.