Unlocking Growth: Why Returns at Inspired Entertainment (NASDAQ: INSE) Are Poised for an Upswing

Looking for stocks that can multiply your investment? There are key signs to watch for. First, check if the company has a rising return on capital employed (ROCE). Second, see if it’s using more capital efficiently. These indicators suggest that the company can reinvest its earnings to grow.

Let’s take a look at Inspired Entertainment (NASDAQ:INSE) as an example. The company’s ROCE has shown positive trends, which is promising for investors.

To clarify, ROCE measures how much profit a company generates on its investments. Analysts calculate it using this formula:

ROCE = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)

For Inspired Entertainment, the calculation is:

0.15 = US$43m ÷ (US$389m – US$109m) (Based on the trailing twelve months to September 2024).

This means Inspired Entertainment has an ROCE of 15%. While that seems standard, it’s significantly higher than the 9.1% average in the hospitality sector.

What’s more, Inspired Entertainment is now seeing real profits from its investments. This shift is great news for shareholders, especially considering the company was not profitable five years ago. Today, it generates a solid 15% return on its capital, having increased its capital usage by 125% in that time. This growth shows there are profitable opportunities ahead, which could lead investors to consider this stock for substantial returns.

In summary, Inspired Entertainment is on an upward trajectory. Its profitability and reinvestment in the business indicate strong potential for future growth. Additionally, shareholders have seen a 41% return over the past five years, a trend that suggests the company is gaining attention for good reasons.

So, should you keep an eye on this stock? Absolutely! The positive trends are promising for those interested in investing wisely.

It’s also worth noting that there might be 1 warning sign for Inspired Entertainment that you should know.