Sabre (NASDAQ:SABR) 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? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. So on that note, Sabre (NASDAQ:SABR) looks quite promising in regards to its trends of return on capital.

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Return On Capital Employed (ROCE): What Is It?

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 Sabre is:

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

0.11 = US$366m ÷ (US$4.4b - US$947m) (Based on the trailing twelve months to June 2025).

Therefore, Sabre has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 10% generated by the Hospitality industry.

See our latest analysis for Sabre

Above you can see how the current ROCE for Sabre 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 Sabre .

What Does the ROCE Trend For Sabre Tell Us?

Like most people, we're pleased that Sabre is now generating some pretax earnings. The company was generating losses five years ago, but now it's turned around, earning 11% which is no doubt a relief for some early shareholders. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 35%. This could potentially mean that the company is selling some of its assets.

In Conclusion...

In a nutshell, we're pleased to see that Sabre has been able to generate higher returns from less capital. Although the company may be facing some issues elsewhere since the stock has plunged 74% in the last five years. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

One final note, you should learn about the 2 warning signs we've spotted with Sabre (including 1 which is significant) .

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.