Advertisement
U.S. markets closed
  • S&P Futures

    5,208.75
    -6.00 (-0.12%)
     
  • Dow Futures

    39,211.00
    -12.00 (-0.03%)
     
  • Nasdaq Futures

    18,187.00
    -44.50 (-0.24%)
     
  • Russell 2000 Futures

    2,048.00
    -1.80 (-0.09%)
     
  • Crude Oil

    82.67
    -0.05 (-0.06%)
     
  • Gold

    2,165.40
    +1.10 (+0.05%)
     
  • Silver

    25.34
    +0.08 (+0.30%)
     
  • EUR/USD

    1.0877
    0.0000 (-0.00%)
     
  • 10-Yr Bond

    4.3400
    +0.0360 (+0.84%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • GBP/USD

    1.2725
    -0.0003 (-0.03%)
     
  • USD/JPY

    149.2270
    +0.1290 (+0.09%)
     
  • Bitcoin USD

    66,284.09
    -1,106.04 (-1.64%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    39,558.71
    -181.73 (-0.46%)
     

What We Make Of Ossen Innovation's (NASDAQ:OSN) Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Ossen Innovation's (NASDAQ:OSN) 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 Ossen Innovation:

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

0.12 = US$16m ÷ (US$187m - US$46m) (Based on the trailing twelve months to June 2020).

Therefore, Ossen Innovation has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 7.6% generated by the Metals and Mining industry.

View our latest analysis for Ossen Innovation

roce
roce

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ossen Innovation's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Ossen Innovation, check out these free graphs here.

The Trend Of ROCE

Ossen Innovation is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 113% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. 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

To sum it up, Ossen Innovation is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 107% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Ossen Innovation, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Advertisement