Returns Are Gaining Momentum At Boyd Gaming (NYSE:BYD)

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Boyd Gaming (NYSE:BYD) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Boyd Gaming:

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

0.18 = US$1.1b ÷ (US$6.3b - US$592m) (Based on the trailing twelve months to March 2023).

Thus, Boyd Gaming has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 9.1% generated by the Hospitality industry.

See 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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

SWOT Analysis for Boyd Gaming

What Does the ROCE Trend For Boyd Gaming Tell Us?

Boyd Gaming is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 18%. Basically the business is earning more per dollar of capital invested and in addition to that, 35% more capital is being employed now too. So we're very much inspired by what we're seeing at Boyd Gaming thanks to its ability to profitably reinvest capital.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Boyd Gaming has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to know some of the risks facing Boyd Gaming we've found 2 warning signs (1 can't be ignored!) that you should be aware of before investing here.

While Boyd Gaming 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.