Betsson (STO:BETS B) Looks To Prolong Its Impressive Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at Betsson (STO:BETS B), we liked what we saw.

Understanding Return On Capital Employed (ROCE)

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 Betsson is:

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

0.26 = €257m ÷ (€1.3b - €287m) (Based on the trailing twelve months to March 2024).

Thus, Betsson has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 21% earned by companies in a similar industry.

See our latest analysis for Betsson

In the above chart we have measured Betsson's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Betsson .

The Trend Of ROCE

In terms of Betsson's history of ROCE, it's quite impressive. The company has consistently earned 26% for the last five years, and the capital employed within the business has risen 102% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. You'll see this when looking at well operated businesses or favorable business models.

On a side note, Betsson has done well to reduce current liabilities to 22% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

In Conclusion...

Betsson has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And the stock has done incredibly well with a 116% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Like most companies, Betsson does come with some risks, and we've found 1 warning sign that you should be aware of.

Betsson is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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.