Liberty SiriusXM Group (NASDAQ:LSXM.K) Has Some Way To Go To Become A Multi-Bagger

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Liberty SiriusXM Group (NASDAQ:LSXM.K) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. 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)

0.074 = US$1.9b ÷ (US$30b - US$4.3b) (Based on the trailing twelve months to December 2022).

So, Liberty SiriusXM Group has an ROCE of 7.4%. In absolute terms, that's a low return and it also under-performs the Media industry average of 9.4%.

Check out our latest analysis for Liberty SiriusXM Group

Above you can see how the current ROCE for Liberty SiriusXM Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Liberty SiriusXM Group.

SWOT Analysis for Liberty SiriusXM Group

What The Trend Of ROCE Can Tell Us

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. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Liberty SiriusXM Group doesn't end up being a multi-bagger in a few years time.

Our Take On Liberty SiriusXM Group's ROCE

In a nutshell, Liberty SiriusXM Group has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has declined 29% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a final note, we've found 2 warning signs for Liberty SiriusXM Group that we think you should be aware of.

While Liberty SiriusXM Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.