Sign up
Log in
Studio City International Holdings (NYSE:MSC) Could Be Struggling To Allocate Capital
Share
Listen to the news

When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. So after glancing at the trends within Studio City International Holdings (NYSE:MSC), we weren't too hopeful.

Understanding 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. To calculate this metric for Studio City International Holdings, this is the formula:

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

0.014 = US$38m ÷ (US$2.9b - US$142m) (Based on the trailing twelve months to March 2025).

Thus, Studio City International Holdings has an ROCE of 1.4%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 10%.

See our latest analysis for Studio City International Holdings

roce
NYSE:MSC Return on Capital Employed June 26th 2025

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Studio City International Holdings.

What The Trend Of ROCE Can Tell Us

We are a bit worried about the trend of returns on capital at Studio City International Holdings. Unfortunately the returns on capital have diminished from the 3.3% that they were earning five years ago. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Studio City International Holdings becoming one if things continue as they have.

Our Take On Studio City International Holdings' ROCE

All in all, the lower returns from the same amount of capital employed aren't exactly signs of a compounding machine. We expect this has contributed to the stock plummeting 80% during the last five years. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.

Studio City International Holdings could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for MSC on our platform quite valuable.

While Studio City International Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.
What's Trending
No content on the Webull website shall be considered a recommendation or solicitation for the purchase or sale of securities, options or other investment products. All information and data on the website is for reference only and no historical data shall be considered as the basis for judging future trends.