PARKEN Sport & Entertainment (CPH:PARKEN) is making the right moves to multiply its stock price

What early trends should we look for to identify a stock that could multiply in value over the long term? Firstly, we want to see something proven return on capital employed (ROCE) increases, and secondly, it grows base of the capital employed. Ultimately, this shows that this is a company that reinvests profits at increasing returns. So when we looked at that PARKING Sports & Entertainment (CPH:PARKEN) and its ROCE trend, we really liked what we saw.

Return on Capital Employed (ROCE): What is it?

Just to clarify in case you’re not sure, ROCE is a measure used to evaluate how much pre-tax income (as a percentage) a company earns from the capital invested in its business. To calculate this key figure for PARKEN Sport & Entertainment, this is the formula:

Return on capital employed = Earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.18 = kr.490m ÷ (kr.3.3b – kr.611m) (Based on the last twelve months ended June 2024).

So, PARKEN Sport & Entertainment has a ROCE of 18%. In absolute terms this is a satisfactory return, but compared to the hotel industry average of 7.5% it is significantly better.

Check out our latest analysis for PARKEN Sport & Entertainment

Even if the past is not representative of the future, it can be helpful to know how a company has performed in the past. That’s why we have this chart above. If you’re interested in further exploring PARKEN Sport & Entertainment’s past, check this out free Chart covering PARKEN Sport & Entertainment’s historical earnings, revenue and cash flow.

What does the ROCE trend tell us for PARKEN Sport & Entertainment?

PARKEN Sport & Entertainment shows some positive trends. Data shows that return on capital increased significantly to 18% over the last five years. Basically, the company earns more per dollar invested and on top of that, 36% more capital is now being deployed. Therefore, we are very inspired by what we see at PARKEN Sport & Entertainment thanks to its ability to profitably reinvest capital.

The key takeaway

In summary, PARKEN Sport & Entertainment has proven that it can reinvest in the company and generate higher returns on capital employed, which is great. And investors seem to expect more of the same in the future, as the stock has rewarded shareholders with a 59% return over the last five years. With that in mind, we think it’s worth taking a closer look at this stock because if PARKEN Sport & Entertainment can maintain these trends, the company could have a bright future ahead of it.

If you would like to research further about PARKEN Sport & Entertainment, you might be interested to learn more 2 warning signs That’s what our analysis found.

Although PARKEN Sport & Entertainment doesn’t have the highest return, check it out here free List of companies that generate high returns on equity with solid balance sheets.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.