Yahoo Finance The Return Trends At Boyd Gaming (NYSE:BYD) Look Promising
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Boyd Gaming (NYSE:BYD) and its trend of ROCE, we really liked what we saw.
Return On Capital Employed (ROCE): What Is It?
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 Boyd Gaming is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = US$951m ÷ (US$6.2b - US$600m) (Based on the trailing twelve months to March 2024).
Thus, Boyd Gaming has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 10% generated by the Hospitality industry.
See our latest analysis for Boyd Gaming
In the above chart we have measured Boyd Gaming's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Boyd Gaming for free.
How Are Returns Trending?
Boyd Gaming's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 174% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. 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 On Boyd Gaming's ROCE
To sum it up, Boyd Gaming is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 108% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Boyd Gaming can keep these trends up, it could have a bright future ahead.
Like most companies, Boyd Gaming does come with some risks, and we've found 2 warning signs that you should be aware of.
While Boyd Gaming 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.
