Nisun International Enterprise Development Group (NASDAQ:NISN) 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Nisun International Enterprise Development Group (NASDAQ:NISN) and its ROCE trend, we weren't exactly thrilled.

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. Analysts use this formula to calculate it for Nisun International Enterprise Development Group:

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

0.092 = US$18m ÷ (US$283m - US$90m) (Based on the trailing twelve months to December 2022).

Thus, Nisun International Enterprise Development Group has an ROCE of 9.2%. On its own, that's a low figure but it's around the 8.1% average generated by the Software industry.

See our latest analysis for Nisun International Enterprise Development Group

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Nisun International Enterprise Development Group has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

There are better returns on capital out there than what we're seeing at Nisun International Enterprise Development Group. Over the past five years, ROCE has remained relatively flat at around 9.2% and the business has deployed 367% 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.

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

As we've seen above, Nisun International Enterprise Development Group's returns on capital haven't increased but it is reinvesting in the business. Since the stock has declined 66% 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.

If you'd like to know more about Nisun International Enterprise Development Group, we've spotted 4 warning signs, and 1 of them shouldn't be ignored.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.