ZoomInfo Technologies (NASDAQ:ZI) Has Some Way To Go To Become A Multi-Bagger

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at ZoomInfo Technologies (NASDAQ:ZI) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. To calculate this metric for ZoomInfo Technologies, this is the formula:

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

0.039 = US$253m ÷ (US$7.1b - US$573m) (Based on the trailing twelve months to September 2023).

Therefore, ZoomInfo Technologies has an ROCE of 3.9%. Ultimately, that's a low return and it under-performs the Interactive Media and Services industry average of 9.0%.

Check out our latest analysis for ZoomInfo Technologies

Above you can see how the current ROCE for ZoomInfo Technologies 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 report for ZoomInfo Technologies.

The Trend Of ROCE

In terms of ZoomInfo Technologies' historical ROCE trend, it doesn't exactly demand attention. Over the past four years, ROCE has remained relatively flat at around 3.9% and the business has deployed 396% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

Our Take On ZoomInfo Technologies' ROCE

As we've seen above, ZoomInfo Technologies' returns on capital haven't increased but it is reinvesting in the business. Since the stock has declined 66% over the last three years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think ZoomInfo Technologies has the makings of a multi-bagger.

If you want to continue researching ZoomInfo Technologies, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.