Integral Ad Science Holding (NASDAQ:IAS) Is Doing The Right Things To Multiply Its Share Price

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Integral Ad Science Holding (NASDAQ:IAS) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Integral Ad Science Holding:

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

0.0097 = US$11m ÷ (US$1.1b - US$53m) (Based on the trailing twelve months to March 2024).

So, Integral Ad Science Holding has an ROCE of 1.0%. In absolute terms, that's a low return and it also under-performs the Media industry average of 11%.

Check out our latest analysis for Integral Ad Science Holding

In the above chart we have measured Integral Ad Science Holding's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Integral Ad Science Holding .

What Can We Tell From Integral Ad Science Holding's ROCE Trend?

We're delighted to see that Integral Ad Science Holding is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses four years ago, but now it's earning 1.0% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Integral Ad Science Holding is utilizing 31% more capital than it was four years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Bottom Line

Overall, Integral Ad Science Holding gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And since the stock has fallen 51% over the last year, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

Like most companies, Integral Ad Science Holding does come with some risks, and we've found 3 warning signs that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.