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There's Been No Shortage Of Growth Recently For Galaxy Entertainment Group's (HKG:27) Returns On Capital

Simply Wall St · 3d ago

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Galaxy Entertainment Group (HKG:27) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

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 Galaxy Entertainment Group is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.10 = HK$8.4b ÷ (HK$95b - HK$11b) (Based on the trailing twelve months to June 2025).

So, Galaxy Entertainment Group has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Hospitality industry average of 7.9% it's much better.

View our latest analysis for Galaxy Entertainment Group

roce
SEHK:27 Return on Capital Employed January 2nd 2026

Above you can see how the current ROCE for Galaxy Entertainment Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Galaxy Entertainment Group for free.

How Are Returns Trending?

Investors would be pleased with what's happening at Galaxy Entertainment Group. The data shows that returns on capital have increased substantially over the last five years to 10%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 23%. So we're very much inspired by what we're seeing at Galaxy Entertainment Group thanks to its ability to profitably reinvest capital.

One more thing to note, Galaxy Entertainment Group has decreased current liabilities to 12% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

Our Take On Galaxy Entertainment Group's ROCE

In summary, it's great to see that Galaxy Entertainment Group can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And since the stock has fallen 33% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a final note, we've found 1 warning sign for Galaxy Entertainment Group that we think you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.