There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Nexstar Media Group's (NASDAQ:NXST) returns on capital, so let's have a look.

We've discovered 2 warning signs about Nexstar Media Group. View them for free.

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. The formula for this calculation on Nexstar Media Group is:

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

0.12 = US$1.3b ÷ (US$11b - US$783m) (Based on the trailing twelve months to December 2024).

So, Nexstar Media Group has an ROCE of 12%.  In absolute terms, that's a satisfactory return, but compared to the Media industry average of 8.9% it's much better.

View our latest analysis for Nexstar Media Group NasdaqGS:NXST Return on Capital Employed May 6th 2025

In the above chart we have measured Nexstar Media Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Nexstar Media Group .

How Are Returns Trending?

Nexstar Media Group's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 133% 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Nexstar Media Group's ROCE

To bring it all together, Nexstar Media Group 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 five years, 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.

Nexstar Media Group does have some risks, we noticed  2 warning signs  (and 1 which makes us a bit uncomfortable)  we think you should know about.

Story Continues

For those who like to invest in solid companies, check out this freelist 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.

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