Yahoo Finance Returns On Capital At Liberty SiriusXM Group (NASDAQ:LSXM.K) Have Stalled
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Liberty SiriusXM Group (NASDAQ:LSXM.K) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
What Is Return On Capital Employed (ROCE)?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Liberty SiriusXM Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.073 = US$1.9b ÷ (US$30b - US$3.9b) (Based on the trailing twelve months to December 2023).
Therefore, Liberty SiriusXM Group has an ROCE of 7.3%. In absolute terms, that's a low return and it also under-performs the Media industry average of 9.8%.
Check out our latest analysis for Liberty SiriusXM Group
Above you can see how the current ROCE for Liberty SiriusXM Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Liberty SiriusXM Group .
What Does the ROCE Trend For Liberty SiriusXM Group Tell Us?
Things have been pretty stable at Liberty SiriusXM Group, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at Liberty SiriusXM Group in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.
Our Take On Liberty SiriusXM Group's ROCE
In summary, Liberty SiriusXM Group isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And in the last five years, the stock has given away 19% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Liberty SiriusXM Group has the makings of a multi-bagger.
Liberty SiriusXM Group does have some risks, we noticed 2 warning signs (and 1 which is a bit concerning) we think you should know about.
While Liberty SiriusXM Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
