United Parks & Resorts Shows Promising Signs of Increasing Efficiency in Capital Investment
American theme park operator United Parks & Resorts (NYSE:PRKS) is demonstrating a positive trend in its capital investment, which is likely to grab the attention of investors seeking potential multi-bagger stocks. By focusing on companies with a growing return on capital employed (ROCE) and an increasing amount of capital employed, investors can potentially identify organizations that effectively reinvest profits for higher returns.
How ROCE Determines a Company's Success
ROCE, a key metric for evaluating a company's performance, measures how much pre-tax income a company generates as a percentage of the capital invested in its business. In the case of United Parks & Resorts, this formula results in an impressive ROCE of 23%. Calculated using earnings before interest and tax (EBIT) of $490 million and capital invested, which is the difference between total assets of $2.6 billion and current liabilities of $406 million, this return significantly exceeds the average of 9.6% seen in similar industries.
United Parks & Resorts' Upward Trend in ROCE
Over the past five years, United Parks & Resorts has experienced a notable upward trend in ROCE. The metric has increased by 135% while the amount of capital employed has remained relatively stable. This upward movement indicates enhanced efficiency as the company is generating higher returns from the same capital investment.
A Promising Investment Option
In conclusion, the increasing ROCE of United Parks & Resorts suggests that the organization is effectively reinvesting its profits to generate higher returns with the same amount of capital employed. This efficiency, combined with an impressive 83% return to shareholders over the past five years, demonstrates that the market recognizes the company's strategic investments. As a result, the theme park operator becomes an appealing option for potential investors.
Analyst comment
Positive news. Analyst prediction: The market is likely to respond positively to United Parks & Resorts’ increasing efficiency in capital investment and higher returns on the same amount of capital, making it an attractive option for investors.
