Returns On Capital Are A Standout For World Wrestling Entertainment (NYSE:WWE) #Returns #Capital #Standout #World #Wrestling #Entertainment #NYSEWWE Welcome to JeroVibes:
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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it’s a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. 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?
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 World Wrestling Entertainment is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) (Total Assets – Current Liabilities)
0.36 = US$295m (US$1.2b – US$425m) (Based on the trailing twelve months to March 2022).
So, World Wrestling Entertainment has an ROCE of 36%. That’s a fantastic return and not only that, it outpaces the average of 6.9% earned by companies in a similar industry.
Check out our latest analysis for World Wrestling Entertainment
NYSE:WWE Return on Capital Employed June 28th 2022
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.
How Are Returns Trending?
The trends we’ve noticed at World Wrestling Entertainment are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 36%. The amount of capital employed has increased too, by 72%. 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.
For the record though, there was a noticeable increase in the company’s current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 34% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. It’s worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.
Our Take On World Wrestling Entertainment’s ROCE
All in all, it’s terrific to see that World Wrestling Entertainment is reaping the rewards from prior investments and is growing its capital base. And a remarkable 215% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it’s worth looking further into this stock because if World Wrestling Entertainment can keep these trends up, it could have a bright future ahead.
On a final note, we found 2 warning signs for World Wrestling Entertainment (1 can’t be ignored) you should be aware of.
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.