Here's What To Make Of Gamehaus Holdings' (NASDAQ:GMHS) Decelerating Rates Of Return

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So, when we ran our eye over Gamehaus Holdings' (NASDAQ:GMHS) trend of ROCE, we liked what we saw.

Our free stock report includes 4 warning signs investors should be aware of before investing in Gamehaus Holdings. Read for free now.

Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for Gamehaus Holdings, this is the formula:

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

0.14 = US$4.3m ÷ (US$49m - US$18m) (Based on the trailing twelve months to March 2025).

Thus, Gamehaus Holdings has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Entertainment industry average of 9.0% it's much better.

Check out our latest analysis for Gamehaus Holdings

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Gamehaus Holdings has performed in the past in other metrics, you can view this free graph of Gamehaus Holdings' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

While the returns on capital are good, they haven't moved much. The company has consistently earned 14% for the last two years, and the capital employed within the business has risen 24% in that time. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

On a side note, Gamehaus Holdings has done well to reduce current liabilities to 37% of total assets over the last two years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

Our Take On Gamehaus Holdings' ROCE

To sum it up, Gamehaus Holdings has simply been reinvesting capital steadily, at those decent rates of return. Despite these impressive fundamentals, the stock has collapsed 87% over the last year, so there is likely other factors affecting the company's future prospects. So in light of that'd we think it's worthwhile looking further into this stock to see if there's any areas for concern.

Gamehaus Holdings does have some risks, we noticed 4 warning signs (and 2 which are concerning) we think you should know about.

While Gamehaus Holdings 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.