Galaxy Entertainment Group (HKG:27) Is Looking To Continue Growing Its Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So when we looked at Galaxy Entertainment Group (HKG:27) and its trend of ROCE, we really liked what we saw.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Galaxy Entertainment Group is:

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

0.10 = HK$8.4b ÷ (HK$95b - HK$11b) (Based on the trailing twelve months to June 2025).

Therefore, Galaxy Entertainment Group has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 8.7% generated by the Hospitality industry.

Check out our latest analysis for Galaxy Entertainment Group

Above you can see how the current ROCE for Galaxy Entertainment Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Galaxy Entertainment Group .

What Can We Tell From Galaxy Entertainment Group's ROCE Trend?

Galaxy Entertainment Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 10%. The amount of capital employed has increased too, by 23%. So we're very much inspired by what we're seeing at Galaxy Entertainment Group thanks to its ability to profitably reinvest capital.

One more thing to note, Galaxy Entertainment Group has decreased current liabilities to 12% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Key Takeaway

In summary, it's great to see that Galaxy Entertainment Group 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. Astute investors may have an opportunity here because the stock has declined 27% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing to note, we've identified 1 warning sign with Galaxy Entertainment Group and understanding it should be part of your investment process.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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.