Yahoo Finance Returns on Capital Paint A Bright Future For Gambling.com Group (NASDAQ:GAMB)
If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Gambling.com Group's (NASDAQ:GAMB) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from 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).
Thus, Gambling.com Group has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.
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.
How Are Returns Trending?
Gambling.com Group is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 23%. The amount of capital employed has increased too, by 271%. 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 Gambling.com Group's ROCE
In summary, it's great to see that Gambling.com Group 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. And since the stock has fallen 22% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
One more thing to note, we've identified 1 warning sign with Gambling.com Group and understanding this should be part of your investment process.
If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.
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