Gambling.com Group (NASDAQ:GAMB) Is Investing Its Capital With Increasing Efficiency

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Gambling.com Group's (NASDAQ:GAMB) returns on capital, so let's have a look.

What Is 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 Gambling.com Group is:

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

0.23 = US$29m ÷ (US$150m - US$26m) (Based on the trailing twelve months to March 2024).

Therefore, Gambling.com Group has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Media industry average of 11%.

View our latest analysis for Gambling.com Group

Above you can see how the current ROCE for Gambling.com Group 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 Gambling.com Group for free.

The Trend Of ROCE

We like the trends that we're seeing from Gambling.com Group. Over the last five years, returns on capital employed have risen substantially to 23%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 271%. So we're very much inspired by what we're seeing at Gambling.com Group thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Gambling.com Group is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 23% in the last year, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a separate note, we've found 1 warning sign for Gambling.com Group you'll probably want to know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.

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