Investors Met With Slowing Returns on Capital At On the Beach Group (LON:OTB)
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over On the Beach Group's (LON:OTB) trend of ROCE, we liked what we saw.
AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for On the Beach Group:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = UK£25m ÷ (UK£496m - UK£311m) (Based on the trailing twelve months to September 2024).
Thus, On the Beach Group has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 7.4% generated by the Hospitality industry.
Check out our latest analysis for On the Beach Group
In the above chart we have measured On the Beach Group's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for On the Beach Group .
While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 14% and the business has deployed 33% more capital into its operations. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn't increased to 63% of total assets, this reported ROCE would probably be less than14% because total capital employed would be higher.The 14% ROCE could be even lower if current liabilities weren't 63% of total assets, because the the formula would show a larger base of total capital employed. Additionally, this high level of current liabilities isn't ideal because it means the company's suppliers (or short-term creditors) are effectively funding a large portion of the business.
To sum it up, On the Beach Group has simply been reinvesting capital steadily, at those decent rates of return. However, despite the favorable fundamentals, the stock has fallen 11% over the last five years, so there might be an opportunity here for astute investors. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.
If you're still interested in On the Beach Group it's worth checking out our to see if it's trading at an attractive price in other respects.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
3 No-Brainer Artificial Intelligence (AI) Growth Stocks to Buy With $200 Right Now
Artificial intelligence (AI) stocks have led the S&P 500 higher over the last two and a half years. These three stocks trade at relatively low valuations compared to other high-flying AI stocks. They each have meaningful upside across the board, from AI software to hardware to chip manufacturing. 10 stocks we like better than Alphabet › Artificial intelligence (AI) has become one of the most-talked-about topics on Wall Street over the last two and a half years. More than 40% of S&P 500 (SNPINDEX: ^GSPC) companies have cited "AI" on their earnings calls for five straight quarters, according to FactSet Insight. Practically every business is looking at how the recent innovations and influx of spending on AI can impact just about every aspect of their business. But while AI is providing a ton of growth for some, it can be a cost center without a clear payoff for others. However, even if a company falls into the former camp, investors should be wary about overpaying for growth that could slow down as the business scales. Finding good value in AI stocks isn't easy. And if you have a limited investment budget, like $200, you'll want to make sure you're only buying the best available options. These three companies all have stocks that trade for less than $200 per share and offer excellent value for the growth potential ahead of them. All three are benefiting from the growth of AI and should play important roles in the future development of artificial intelligence and computing from here. Many investors are worried about the impact of artificial intelligence on Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) core Google Search product. Apple's Eddy Cue testified that search queries were down on its Safari browser during the month of April for the first time in 22 years, supporting the idea that AI services like ChatGPT are eating into its market share. But a decline in searches on a single browser, while surprising, isn't too concerning. AI is a bigger boost to Alphabet than a challenge. It's seen great success with its AI Overviews in search queries, which management says increase engagement while monetizing at the same level as traditional search results. It's also leveraged AI to offer new features like circle-to-search and Google Lens, which overindex toward valuable product searches. Artificial intelligence has been a massive driver of growth for Alphabet's Google Cloud business. It saw revenue climb 28% in the first quarter, with its operating margin expanding from 9.4% to 17.8%. Management said it remains supply-constrained, so strong revenue growth should continue. On top of that, Google's bigger cloud computing competitors sport even higher operating margins, so there's room to expand profits as it scales. At about $177 per share, the stock trades for about 18.5 times forward earnings expectations. That's well below comparable stocks, but Alphabet does have some regulatory pressure on its business on top of worries about how AI could negatively impact its cash flow. But with a massive cash-flowing business, an increasingly profitable cloud computing business, and a big capital return program, the stock looks very attractive at this level. Qualcomm (NASDAQ: QCOM) isn't the chipmaker many people think of when they're talking about AI chip stocks. It doesn't make high-end GPUs or custom silicon solutions for AI training or inference. It makes chips that primarily end up in smartphones. But Qualcomm has plans to enter the data center business, focusing on CPUs designed to work in tandem with AI accelerator chips. It believes its expertise in low-power, high-performance chips for smartphones will translate into very effective chip designs for data centers. It recently agreed to acquire Alphawave Semi with the aim of bolstering its data center capabilities. The company will face significant competition in that market, but not all AI inference will take place in the cloud. There's a growing push to perform AI processing on devices themselves, which provides advantages in security, privacy, and speed. To that end, Qualcomm is well-positioned to see a growing share of the market, as its Snapdragon mobile processors are found in most high-end Android devices. As on-device AI becomes a differentiator, demand for high-end devices could increase, boosting Qualcomm's mobile processor sales. In the meantime, Qualcomm holds the patents for wireless baseband chips found in practically every phone. As a result, it collects a royalty for every smartphone sale. Apple is notably moving away from Qualcomm, developing its own chipsets, but the process is a big hurdle. Few other phone makers have the capability, capital, or scale necessary to cut out Qualcomm. As such, the licensing business should provide a stable source of earnings for the business for the foreseeable future. At around $160 per share, the stock trades for just 13.5 times forward earnings. That's an incredible value for a company with strong long-term positions in Android phones, and it seems Apple's moves are weighing too heavily on the stock. With a potential data center business on the horizon, it could have another big business like its mobile processors. But even with just the mobile chips and licensing business producing steady free cash flow, it's still a great value at this price. While cloud computing providers are trying to stock their data centers with more and more chips for artificial intelligence training and inference, somebody has to make those chips. And in order to do that, you need specialized equipment. That's where Applied Materials (NASDAQ: AMAT) comes in. The company produces a broad portfolio of wafer fabrication equipment, including etching, deposition, and process control. Applied Materials' ability to participate in all of those areas gives it an advantage. It can cross-sell manufacturers on its equipment, allowing it to compete with more specialized equipment makers. And as one of the largest equipment providers, it also has more revenue to reinvest in R&D to produce the next generation of equipment or expand its portfolio, creating a virtuous cycle and extending its technology lead. The push to expand chip production has been a boon for Applied Materials. Despite sales restrictions in China and slower growth in the automotive segment, the equipment maker grew sales 7% in the first quarter. The shift toward more high-end devices also helped expand its gross margin to over 49% last quarter. Applied Materials' product is extremely sticky, too. Once a manufacturer buys its equipment, it wants to get the most out of it. That means a long product life and recurring service revenue. With the stock trading at about $175 per share, it sports a forward P/E of about 18.5. That's a great value for a company growing revenue at a steady high-single-digit clip with expanding margins. While the business can be cyclical, the long-term trend is for more and more advanced chip sales. Applied Materials is well-positioned to capitalize on that trend, and its current stock price gives investors a great opportunity to buy into it. Before you buy stock in Alphabet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Alphabet wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $655,255!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $888,780!* Now, it's worth noting Stock Advisor's total average return is 999% — a market-crushing outperformance compared to 174% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy has positions in Alphabet, Apple, Applied Materials, and Qualcomm. The Motley Fool has positions in and recommends Alphabet, Apple, Applied Materials, and Qualcomm. The Motley Fool has a disclosure policy. 3 No-Brainer Artificial Intelligence (AI) Growth Stocks to Buy With $200 Right Now was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 hours ago
- Yahoo
Self-made billionaire college dropout Alexandr Wang signs $14.3 billion deal to bolster Meta's AI efforts: ‘There's a huge premium to naivete'
Alexandr Wang, once the youngest self-made billionaire in the world, has agreed to join Meta to work on AI 'superintelligence,' leaving the startup that made him rich after dropping out of MIT. Alexandr Wang's Scale AI just inked a $14.3 billion investment deal with Meta, which transitions the 28-year-old out of his CEO position at the startup he co-founded with fellow billionaire and estranged business partner Lucy Guo. Wang announced Thursday on X that he's leaving Scale AI to join Meta as part of an agreement that gives CEO Mark Zuckerberg's tech company a 49% stake in the startup. Wang became the world's youngest self-made billionaire at age 24, just five years after dropping out of college and creating the San Francisco-based company. Now, his estimated net worth is $3.6 billion. 'I started this company right out of freshman year of MIT and never looked back,' Wang wrote in his memo to Scale AI employees on Thursday. 'I wouldn't change a minute of it.' Wang will continue to serve as a director on the company's board while working on 'superintelligence efforts' for Meta, a Scale AI spokesperson told CNBC, but did not elaborate on specifics. In his note, Wang said he would poach a few 'Scalien' employees to take with him to Meta, but did not name them. In the interim, Scale's board and Wang decided to appoint chief strategy officer Jason Droege as a temporary CEO. Prior to joining Scale AI in August 2024, Droege was a venture partner at Benchmark and an Uber vice president, according to his LinkedIn. For Wang, he attributes some of his success throughout the years to being a relative newcomer to the AI industry. 'I believe there's a huge premium to naivete,' Wang told Daniel Levine on a 2023 Youtube podcast. 'Approaching industries with a totally blank slate and without a fine grain understanding of what makes things hard is actually part of what allows you to accomplish things.' Wang also encouraged startup founders to be more 'open-minded,' something he and his colleagues at Scale AI championed from the the company's early days. Zuckerberg has reportedly made AI a top priority for 2025. The investment in Wang's expertise may be part of the reported assembly of a 50-person superintelligence AI team at Meta meant to gain ground on rivals like Google and OpenAI. Meta's recent Llama 4 AI models received a lukewarm response from developers, CNBC reported in May. Wang will bring along with him experience working with Meta rivals, including Google, Microsoft, and OpenAI. Meta is one of Scale AI's biggest clients. In his memo, Wang wrote he was hesitant to agree to the offer to leave Scale AI at first, calling the option 'unimaginable' after raising $1 billion last year from investors including Amazon and Meta at a valuation of $13.8 billion. 'But as I spent time truly considering it, I realized this was a deeply unique moment, not just for me, but for Scale as well,' Wang wrote. This deal more than doubles Scale AI's valuation to $29 billion. This story was originally featured on
Yahoo
2 hours ago
- Yahoo
WWDC 2025: Apple Is Years Behind Google and Microsoft in AI. How Much Does It Matter?
PCMag editors select and review products independently. If you buy through affiliate links, we may earn commissions, which help support our testing. At Apple's 2024 , I sat in the baking sun outside the company's glass spaceship-like headquarters in Cupertino while Craig Federighi described the marvelous capabilities of Apple Intelligence. He promised that your iPhone would be able to synthesize your interactions with public data to deliver practical answers to questions like 'What time should I leave to pick up Julian?' Your phone would know that Julian is your nephew who is visiting you in Albuquerque on the 6:10 Delta flight, and how the current traffic affects when you should depart for the airport. These examples excited the crowd. But this and other functionality still isn't available, and there's no sign of Apple doing anything about it. Meanwhile, Google and Microsoft continue to add advanced AI features to their respective platforms. We're fast approaching a breaking point here. If Cupertino doesn't recenter its attention on Apple Intelligence very soon (WWDC seems like an obvious time to start) and make tangible progress, I don't think it will ever be a true competitor in the AI space. Consequentially, I don't think consumers will continue to pay for technology with simply average AI. Siri is a major entry point for AI features on Apple devices, so last year, I asked with high expectations: Now, we know that the answer is 'not this year.' Instead, we got a few updates, such as the ability to type to Siri, better voice recognition, continued context, a full-screen glowing effect, and integrated Apple product knowledge. For me, the best among these is the continued conversational context, which means Siri remembers all the previous things you say or type during an interaction. Other capabilities also arrived across Apple's OSes, but they too are underwhelming. They allow you to generate emoji and get writing assistance, for example. These updates are a far cry from the vision Apple outlined at WWDC. I applaud the development of the Private Cloud Compute feature since a secure environment for AI is vital, but Apple Intelligence still needs to have compelling features for people to care. On that note, the company has since hinted that the truly smarter AI-powered Siri won't be arriving . That's two years after and a year after Gemini showed up on Google's Android. Two years is a long time to be behind on AI, and potentially an insurmountable hurdle. Copilot and Gemini are far more advanced at this point. The AI assistants can see what's on your screen and provide information, analysis, and actions based on it. They can also organize, summarize, and draft responses for your emails, generate photorealistic images (Apple's Image Playground can create only cartoon-like images), and translate any playing audio or video on your device in real-time. Though Apple promises this kind of intelligence, it's not nearly on the same level. According to reports, Apple will apparently focus on its Solarium interface update at WWDC instead of announcing development efforts for Apple Intelligence. Its OSes already benefit from decades of refinements and deep familiarity among users, so I'm not really sure what the point is in light of its AI shortcomings. For all its AI woes, Apple is still a leader among phone vendors. Yes, iPhone sales over the last quarter, and market share edged down from 19% to 18% among all phone vendors. But Samsung's market share also slipped, from 20% to 19%. Both of these declines could just be due to market saturation. People might just be unwilling to spend on a new phone because of . Restrictions on iPhone sales in China, where overall phone sales actually grew, are also likely affecting Apple's numbers. On the desktop OS side, the of macOS computers continues to rise at the expense of Windows PC manufacturers, though it's still far behind Dell, Lenovo, and HP. Whether we just aren't far enough into the era of AI for sales figures to reflect Apple's AI failings remains unclear, but the industry is shifting fast. And Apple is actually in a good position hardware-wise; all its latest devices have chips capable of local AI processing. Not all PCs have , and not all Android phones have the power to run on-device AI features. That could be Apple's saving grace if only the software features catch up. AI has existed a lot longer than you might realize. Machine learning and neural networks have been around for decades, dating all the way back to the '50s and gathering steam in the '90s, aughts, and teens. Progress in AI takes time, too—a lot of time. It took until just a couple of years ago to make the jump to arrive at the kind of Generative Pre-trained Transformer technology that made ChatGPT seem so revolutionary. Apple is a big company with massive resources and top tech minds. It could absolutely become competitive, but it needs to commit to this goal with a sense of urgency to have a chance to catch Google and Microsoft and save its sales numbers in the long run. Otherwise, it might not ever be able to meet consumers' expectations and excitement, and thus risks missing out on the defining technology of this decade.
