Here's What Nisun International Enterprise Development Group's (NASDAQ:NISN) Strong Returns On Capital Mean

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, the ROCE of Nisun International Enterprise Development Group (NASDAQ:NISN) looks attractive right now, so lets see what the trend of returns can tell us.

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

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. To calculate this metric for Nisun International Enterprise Development Group, this is the formula:

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

0.21 = US$38m ÷ (US$274m - US$89m) (Based on the trailing twelve months to December 2021).

Thus, Nisun International Enterprise Development Group has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

View our latest analysis for Nisun International Enterprise Development Group

Above you can see how the current ROCE for Nisun International Enterprise Development Group 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 Nisun International Enterprise Development Group here for free.

How Are Returns Trending?

In terms of Nisun International Enterprise Development Group's history of ROCE, it's quite impressive. The company has employed 485% more capital in the last five years, and the returns on that capital have remained stable at 21%. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.

What We Can Learn From Nisun International Enterprise Development Group's ROCE

Nisun International Enterprise Development Group has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. What's surprising though is that the stock has collapsed 82% over the last five years, so there might be other areas of the business hurting its prospects. In any case, we like the underlying trends and would look further into this stock.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Nisun International Enterprise Development Group (of which 1 is significant!) that you should know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.