Investors Will Want OneSpaWorld Holdings' (NASDAQ:OSW) Growth In ROCE To Persist

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, OneSpaWorld Holdings (NASDAQ:OSW) looks quite promising in regards to its trends of return on capital.

We've discovered 1 warning sign about OneSpaWorld Holdings. View them for free.

Understanding 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. Analysts use this formula to calculate it for OneSpaWorld Holdings:

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

0.13 = US$81m ÷ (US$709m - US$75m) (Based on the trailing twelve months to March 2025).

Therefore, OneSpaWorld Holdings has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 9.7% generated by the Consumer Services industry.

Check out our latest analysis for OneSpaWorld Holdings

In the above chart we have measured OneSpaWorld Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering OneSpaWorld Holdings for free.

The Trend Of ROCE

OneSpaWorld Holdings' ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 214% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

In Conclusion...

To bring it all together, OneSpaWorld Holdings has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 211% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if OneSpaWorld Holdings can keep these trends up, it could have a bright future ahead.

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

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.