Returns At Boyd Gaming (NYSE:BYD) Are On The Way Up
If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Boyd Gaming's (NYSE:BYD) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Boyd Gaming:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = US$1.0b ÷ (US$6.1b - US$576m) (Based on the trailing twelve months to December 2022).
So, Boyd Gaming has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Hospitality industry average of 11% it's much better.
View our latest analysis for Boyd Gaming
Above you can see how the current ROCE for Boyd Gaming 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 report on analyst forecasts for the company.
So How Is Boyd Gaming's ROCE Trending?
Investors would be pleased with what's happening at Boyd Gaming. The data shows that returns on capital have increased substantially over the last five years to 19%. The amount of capital employed has increased too, by 28%. So we're very much inspired by what we're seeing at Boyd Gaming thanks to its ability to profitably reinvest capital.
The Key Takeaway
In summary, it's great to see that Boyd Gaming can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with a respectable 93% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
One more thing: We've identified 3 warning signs with Boyd Gaming (at least 1 which can't be ignored) , and understanding them would certainly be useful.
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.
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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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