There's Been No Shortage Of Growth Recently For Sabre's (NASDAQ:SABR) Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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 when we looked at Sabre (NASDAQ:SABR) and its trend of ROCE, we really liked what we saw.

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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)

0.092 = US$329m ÷ (US$4.7b - US$1.1b) (Based on the trailing twelve months to March 2025).

Therefore, Sabre has an ROCE of 9.2%. In absolute terms, that's a low return but it's around the Hospitality industry average of 9.6%.

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'd like, you can check out the forecasts from the analysts covering Sabre for free.

How Are Returns Trending?

Sabre has not disappointed in regards to ROCE growth. The data shows that returns on capital have increased by 568% over the trailing five years. The company is now earning US$0.09 per dollar of capital employed. In regards to capital employed, Sabre appears to been achieving more with less, since the business is using 25% less capital to run its operation. Sabre may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Bottom Line

In the end, Sabre has proven it's capital allocation skills are good with those higher returns from less amount of capital. Given the stock has declined 66% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing: We've identified 2 warning signs with Sabre (at least 1 which is significant) , and understanding these would certainly be useful.

While Sabre may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.