We Like Monarch Casino & Resort's (NASDAQ:MCRI) Returns And Here's How They're Trending

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. And in light of that, the trends we're seeing at Monarch Casino & Resort's (NASDAQ:MCRI) look very promising so lets take a look.

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 Monarch Casino & Resort is:

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

0.21 = US$118m ÷ (US$689m - US$141m) (Based on the trailing twelve months to September 2022).

Therefore, Monarch Casino & Resort has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

Check out our latest analysis for Monarch Casino & Resort

In the above chart we have measured Monarch Casino & Resort's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Monarch Casino & Resort Tell Us?

Monarch Casino & Resort is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 21%. Basically the business is earning more per dollar of capital invested and in addition to that, 91% more capital is being employed now too. So we're very much inspired by what we're seeing at Monarch Casino & Resort thanks to its ability to profitably reinvest capital.

Our Take On Monarch Casino & Resort's ROCE

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 Monarch Casino & Resort has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 66% return over the last five years. In light of that, we think it's worth looking further into this stock because if Monarch Casino & Resort can keep these trends up, it could have a bright future ahead.

While Monarch Casino & Resort looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MCRI is currently trading for a fair price.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.