Yahoo Finance Returns At Wynn Resorts (NASDAQ:WYNN) Appear To Be Weighed Down
What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at Wynn Resorts (NASDAQ:WYNN) and its ROCE trend, we weren't exactly thrilled.
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 Wynn Resorts is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.09 = US$1.1b ÷ (US$14b - US$2.2b) (Based on the trailing twelve months to December 2023).
Therefore, Wynn Resorts has an ROCE of 9.0%. In absolute terms, that's a low return but it's around the Hospitality industry average of 9.6%.
See our latest analysis for Wynn Resorts
In the above chart we have measured Wynn Resorts' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Wynn Resorts .
What Can We Tell From Wynn Resorts' ROCE Trend?
Over the past five years, Wynn Resorts' ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Wynn Resorts doesn't end up being a multi-bagger in a few years time.
The Bottom Line
We can conclude that in regards to Wynn Resorts' returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 24% over the last five years, investors may not be too optimistic on this trend improving either. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.
One more thing: We've identified 4 warning signs with Wynn Resorts (at least 2 which are potentially serious) , and understanding them would certainly be useful.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
