- United States
Why We Like The Returns At World Wrestling Entertainment (NYSE:WWE)
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at World Wrestling Entertainment's (NYSE:WWE) look very promising so lets take a look.
Return On Capital Employed (ROCE): What Is It?
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 World Wrestling Entertainment, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.34 = US$313m ÷ (US$1.4b - US$432m) (Based on the trailing twelve months to December 2022).
So, World Wrestling Entertainment has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.
Check out our latest analysis for World Wrestling Entertainment
Above you can see how the current ROCE for World Wrestling Entertainment 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 World Wrestling Entertainment.
What Does the ROCE Trend For World Wrestling Entertainment Tell Us?
World Wrestling Entertainment is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 34%. Basically the business is earning more per dollar of capital invested and in addition to that, 94% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
What We Can Learn From World Wrestling Entertainment's ROCE
In summary, it's great to see that World Wrestling Entertainment can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 145% to shareholders over the last five years, it looks like investors are recognizing these changes. 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 continue researching World Wrestling Entertainment, you might be interested to know about the 1 warning sign that our analysis has discovered.
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.
Valuation is complex, but we're helping make it simple.
Find out whether World Wrestling Entertainment is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
World Wrestling Entertainment
World Wrestling Entertainment, Inc., an integrated media and entertainment company, engages in the sports entertainment business in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.
Flawless balance sheet and good value.