Returns On Capital Are Showing Encouraging Signs At Wonderla Holidays (NSE:WONDERLA)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Wonderla Holidays' (NSE:WONDERLA) returns on capital, so let's have a look.

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. The formula for this calculation on Wonderla Holidays is:

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

0.19 = ₹2.1b ÷ (₹12b - ₹432m) (Based on the trailing twelve months to December 2023).

Thus, Wonderla Holidays 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.

Check out our latest analysis for Wonderla Holidays

Above you can see how the current ROCE for Wonderla Holidays 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 Wonderla Holidays for free.

The Trend Of ROCE

Wonderla Holidays is displaying some positive trends. 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 29%. So we're very much inspired by what we're seeing at Wonderla Holidays thanks to its ability to profitably reinvest capital.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Wonderla Holidays has. And a remarkable 215% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Wonderla Holidays can keep these trends up, it could have a bright future ahead.

While Wonderla Holidays looks impressive, no company is worth an infinite price. The intrinsic value infographic for WONDERLA helps visualize whether it is currently trading for a fair price.

While Wonderla Holidays 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.