Investors Will Want Trade Desk's (NASDAQ:TTD) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 when we looked at Trade Desk (NASDAQ:TTD) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Trade Desk, this is the formula:

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

0.15 = US$453m ÷ (US$5.7b - US$2.7b) (Based on the trailing twelve months to March 2025).

So, Trade Desk has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Media industry average of 8.6% it's much better.

See our latest analysis for Trade Desk

In the above chart we have measured Trade Desk'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 Trade Desk .

What Does the ROCE Trend For Trade Desk Tell Us?

Investors would be pleased with what's happening at Trade Desk. The data shows that returns on capital have increased substantially over the last five years to 15%. Basically the business is earning more per dollar of capital invested and in addition to that, 193% more capital is being employed now too. So we're very much inspired by what we're seeing at Trade Desk thanks to its ability to profitably reinvest capital.

Another thing to note, Trade Desk has a high ratio of current liabilities to total assets of 47%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Trade Desk has. And a remarkable 132% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Trade Desk can keep these trends up, it could have a bright future ahead.

Trade Desk does have some risks though, and we've spotted 1 warning sign for Trade Desk that you might be interested in.

While Trade Desk 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.

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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.