Spin Master (TSE:TOY) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 Spin Master (TSE:TOY) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Spin Master, this is the formula:

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

0.16 = US$267m ÷ (US$2.5b - US$837m) (Based on the trailing twelve months to June 2025).

So, Spin Master has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Leisure industry average of 12% it's much better.

See our latest analysis for Spin Master

Above you can see how the current ROCE for Spin Master compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Spin Master for free.

So How Is Spin Master's ROCE Trending?

The trends we've noticed at Spin Master are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. The amount of capital employed has increased too, by 111%. So we're very much inspired by what we're seeing at Spin Master thanks to its ability to profitably reinvest capital.

The Bottom Line On Spin Master's ROCE

All in all, it's terrific to see that Spin Master is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 30% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a separate note, we've found 1 warning sign for Spin Master you'll probably want to know about.

While Spin Master may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.