OneSpaWorld Holdings (NASDAQ:OSW) Is Looking To Continue Growing Its Returns On Capital

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, OneSpaWorld Holdings (NASDAQ:OSW) looks quite promising in regards to its trends of return on capital.

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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. 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$86m ÷ (US$733m - US$84m) (Based on the trailing twelve months to September 2025).

So, OneSpaWorld Holdings has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 11% generated by the Consumer Services industry.

View our latest analysis for OneSpaWorld Holdings

Above you can see how the current ROCE for OneSpaWorld Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for OneSpaWorld Holdings .

So How Is OneSpaWorld Holdings' ROCE Trending?

We're delighted to see that OneSpaWorld Holdings is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 13% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

The Bottom Line On OneSpaWorld Holdings' ROCE

In summary, we're delighted to see that OneSpaWorld Holdings has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 155% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing to note, we've identified 1 warning sign with OneSpaWorld Holdings and understanding this should be part of your investment process.

While OneSpaWorld Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.