Nisun International Enterprise Development Group's (NASDAQ:NISN) Returns Have Hit A Wall

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Nisun International Enterprise Development Group (NASDAQ:NISN) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. 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)

0.072 = US$14m ÷ (US$320m - US$125m) (Based on the trailing twelve months to June 2023).

Thus, Nisun International Enterprise Development Group has an ROCE of 7.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.3%.

View 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Nisun International Enterprise Development Group.

How Are Returns Trending?

The returns on capital haven't changed much for Nisun International Enterprise Development Group in recent years. The company has employed 364% more capital in the last five years, and the returns on that capital have remained stable at 7.2%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

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. And investors appear hesitant that the trends will pick up because the stock has fallen 46% in the last five years. Therefore based on the analysis done in this article, we don't think Nisun International Enterprise Development Group has the makings of a multi-bagger.

Nisun International Enterprise Development Group does have some risks though, and we've spotted 3 warning signs for Nisun International Enterprise Development Group that you might be interested in.

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.