Here's What To Make Of Nisun International Enterprise Development Group's (NASDAQ:NISN) Decelerating Rates Of Return

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Nisun International Enterprise Development Group (NASDAQ:NISN), it didn't seem to tick all of these boxes.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Nisun International Enterprise Development Group is:

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

0.017 = US$3.7m ÷ (US$271m - US$59m) (Based on the trailing twelve months to December 2024).

So, Nisun International Enterprise Development Group has an ROCE of 1.7%. In absolute terms, that's a low return and it also under-performs the Software industry average of 8.8%.

View our latest analysis for Nisun International Enterprise Development Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Nisun International Enterprise Development Group's ROCE against it's prior returns. If you're interested in investigating Nisun International Enterprise Development Group's past further, check out this free graph covering Nisun International Enterprise Development Group's past earnings, revenue and cash flow.

So How Is Nisun International Enterprise Development Group's ROCE Trending?

The returns on capital haven't changed much for Nisun International Enterprise Development Group in recent years. Over the past five years, ROCE has remained relatively flat at around 1.7% and the business has deployed 275% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

On a side note, Nisun International Enterprise Development Group has done well to reduce current liabilities to 22% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

In Conclusion...

Long story short, while Nisun International Enterprise Development Group has been reinvesting its capital, the returns that it's generating haven't increased. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 97% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you'd like to know more about Nisun International Enterprise Development Group, we've spotted 4 warning signs, and 1 of them doesn'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.