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

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. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Integral Ad Science Holding (NASDAQ:IAS) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Integral Ad Science Holding, this is the formula:

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

0.041 = US$44m ÷ (US$1.1b - US$61m) (Based on the trailing twelve months to June 2024).

Thus, Integral Ad Science Holding has an ROCE of 4.1%. In absolute terms, that's a low return and it also under-performs the Media industry average of 9.4%.

Check out our latest analysis for Integral Ad Science Holding

Above you can see how the current ROCE for Integral Ad Science Holding compares to its prior returns on capital, but there's only so much you can tell from the past. 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 .

How Are Returns Trending?

Integral Ad Science Holding has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses four years ago, but now it's earning 4.1% which is a sight for sore eyes. Not only that, but the company is utilizing 31% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Key Takeaway

In summary, it's great to see that Integral Ad Science Holding has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 52% in the last three years. So researching this company further and determining whether or not these trends will continue seems justified.

On a separate note, we've found 3 warning signs for Integral Ad Science Holding you'll probably want to know about.

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.

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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.