Liberty SiriusXM Group (NASDAQ:LSXM.K) Has More To Do To Multiply In Value Going Forward

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating Liberty SiriusXM Group (NASDAQ:LSXM.K), we don't think it's current trends fit the mold of a multi-bagger.

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

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. To calculate this metric for Liberty SiriusXM Group, this is the formula:

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

0.071 = US$1.9b ÷ (US$30b - US$3.4b) (Based on the trailing twelve months to September 2023).

So, Liberty SiriusXM Group has an ROCE of 7.1%. On its own, that's a low figure but it's around the 8.2% average generated by the Media industry.

See our latest analysis for Liberty SiriusXM Group

In the above chart we have measured Liberty SiriusXM Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Liberty SiriusXM Group.

How Are Returns Trending?

Things have been pretty stable at Liberty SiriusXM Group, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Liberty SiriusXM Group in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Key Takeaway

In summary, Liberty SiriusXM Group isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has declined 19% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Liberty SiriusXM Group has the makings of a multi-bagger.

One more thing, we've spotted 1 warning sign facing Liberty SiriusXM Group that you might find interesting.

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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.