Returns Are Gaining Momentum At Diebold Nixdorf (NYSE:DBD)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Diebold Nixdorf's (NYSE:DBD) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Diebold Nixdorf:

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

0.10 = US$255m ÷ (US$3.8b - US$1.3b) (Based on the trailing twelve months to June 2024).

So, Diebold Nixdorf has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 8.2% generated by the Tech industry.

Check out our latest analysis for Diebold Nixdorf

Above you can see how the current ROCE for Diebold Nixdorf 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 analyst report for Diebold Nixdorf .

The Trend Of ROCE

Diebold Nixdorf's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 106% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Diebold Nixdorf's ROCE

To bring it all together, Diebold Nixdorf has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last year, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Diebold Nixdorf does have some risks, we noticed 3 warning signs (and 2 which are a bit concerning) we think you should know about.

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.