Returns At International Game Technology (NYSE:IGT) Are On The Way Up

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at International Game Technology (NYSE:IGT) and its trend of ROCE, we really liked what we saw.

Understanding 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. The formula for this calculation on International Game Technology is:

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

0.11 = US$981m ÷ (US$10b - US$1.9b) (Based on the trailing twelve months to September 2023).

Thus, International Game Technology has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 9.2% generated by the Hospitality industry.

See our latest analysis for International Game Technology

Above you can see how the current ROCE for International Game Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for International Game Technology.

What Can We Tell From International Game Technology's ROCE Trend?

International Game Technology has not disappointed in regards to ROCE growth. The figures show that over the last five years, returns on capital have grown by 63%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Interestingly, the business may be becoming more efficient because it's applying 26% less capital than it was five years ago. International Game Technology may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Key Takeaway

In the end, International Game Technology has proven it's capital allocation skills are good with those higher returns from less amount of capital. Since the stock has returned a staggering 105% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing: We've identified 3 warning signs with International Game Technology (at least 1 which can't be ignored) , and understanding these would certainly be useful.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.