Returns At OraSure Technologies (NASDAQ:OSUR) Appear To Be Weighed Down

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So, when we ran our eye over OraSure Technologies' (NASDAQ:OSUR) trend of ROCE, we liked what we saw.

What Is 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 OraSure Technologies:

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

0.12 = US$50m ÷ (US$458m - US$41m) (Based on the trailing twelve months to September 2023).

Thus, OraSure Technologies has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 8.3% it's much better.

View our latest analysis for OraSure Technologies

roce

In the above chart we have measured OraSure Technologies' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is OraSure Technologies' ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 12% for the last five years, and the capital employed within the business has risen 48% in that time. Since 12% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On OraSure Technologies' ROCE

In the end, OraSure Technologies has proven its ability to adequately reinvest capital at good rates of return. However, despite the favorable fundamentals, the stock has fallen 47% over the last five years, so there might be an opportunity here for astute investors. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

One more thing, we've spotted 1 warning sign facing OraSure Technologies that you might find interesting.

While OraSure Technologies isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.