Boyd Gaming (NYSE:BYD) Might Have The Makings Of A Multi-Bagger

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Boyd Gaming (NYSE:BYD) looks quite promising in regards to its trends of return on capital.

What Is 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 Boyd Gaming is:

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

0.16 = US$914m ÷ (US$6.2b - US$600m) (Based on the trailing twelve months to June 2024).

So, Boyd Gaming has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Hospitality industry average of 11% it's much better.

Check out our latest analysis for Boyd Gaming

Above you can see how the current ROCE for Boyd Gaming 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 Boyd Gaming for free.

What The Trend Of ROCE Can Tell Us

Boyd Gaming's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 145% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. 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.

The Bottom Line On Boyd Gaming's ROCE

In summary, we're delighted to see that Boyd Gaming has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 148% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Boyd Gaming can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 2 warning signs facing Boyd Gaming that you might find interesting.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com