Capital investment trends at Nu Skin Enterprises (NYSE:NUS) appear strong

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. First, we’ll want to see proof come back on capital employed (ROCE) which is increasing, and on the other hand, a base capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. Therefore, when we briefly examined Nu Skin Enterprises (NYSE:NUS) Trending ROCE, we were very pleased with what we saw.

What is return on capital employed (ROCE)?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. The formula for this calculation on Nu Skin Enterprises is:

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

0.21 = $292 million ÷ ($1.9 billion – $530 million) (Based on the last twelve months to December 2021).

Thereby, Nu Skin Enterprises has a ROCE of 21%. That in itself is a fantastic return on investment, even though it’s the same as the personal products industry average of 21%.

Check out our latest analysis for Nu Skin Enterprises


Above you can see how Nu Skin Enterprises’ current ROCE compares to its past returns on capital, but there is little you can say about the past. If you wish, you can view analyst forecasts covering Nu Skin Enterprises here for free.

What the ROCE trend can tell us

It’s hard not to be impressed with Nu Skin Enterprises’ return on capital. Over the past five years, ROCE has remained relatively stable at around 21% and the company has deployed 28% more capital into its operations. Such returns are the envy of most companies and given that they have repeatedly reinvested at these rates, even better. If these trends can continue, we wouldn’t be surprised if the company went multi-bagger.

In conclusion…

Ultimately, the company has proven that it can reinvest its capital at high rates of return, which you’ll recall is a trait of a multi-bagger. Despite good fundamentals, the stock’s total returns have been virtually flat over the past five years. For this reason, savvy investors may want to dig into this company in case it is a top investment.

Like most businesses, Nu Skin Enterprises involves certain risks, and we have found 2 warning signs of which you should be aware.

If you want to find more stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.