Returns Are Gaining Momentum At Rush Street Interactive (NYSE:RSI)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Rush Street Interactive (NYSE:RSI) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Rush Street Interactive, this is the formula:

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

0.17 = US$37m ÷ (US$387m - US$173m) (Based on the trailing twelve months to March 2025).

Thus, Rush Street Interactive has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 10% generated by the Hospitality industry.

See our latest analysis for Rush Street Interactive

Above you can see how the current ROCE for Rush Street Interactive 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 Rush Street Interactive for free.

What Does the ROCE Trend For Rush Street Interactive Tell Us?

We're delighted to see that Rush Street Interactive is reaping rewards from its investments and has now broken into profitability. The company was generating losses four years ago, but now it's turned around, earning 17% which is no doubt a relief for some early shareholders. Additionally, the business is utilizing 42% less capital than it was four years ago, and taken at face value, that can mean the company needs less funds at work to get a return. Rush Street Interactive could be selling under-performing assets since the ROCE is improving.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Effectively this means that suppliers or short-term creditors are now funding 45% of the business, which is more than it was four years ago. And with current liabilities at those levels, that's pretty high.

Our Take On Rush Street Interactive's ROCE

In a nutshell, we're pleased to see that Rush Street Interactive has been able to generate higher returns from less capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 44% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for RSI that compares the share price and estimated value.

While Rush Street Interactive isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.