Getty Images Holdings (NYSE:GETY) Has Some Way To Go To Become A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Having said that, from a first glance at Getty Images Holdings (NYSE:GETY) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What Is 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. The formula for this calculation on Getty Images Holdings is:

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

0.097 = US$204m ÷ (US$2.4b - US$302m) (Based on the trailing twelve months to September 2022).

Thus, Getty Images Holdings has an ROCE of 9.7%. On its own that's a low return, but compared to the average of 5.2% generated by the Interactive Media and Services industry, it's much better.

Check out our latest analysis for Getty Images Holdings

In the above chart we have measured Getty Images Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Getty Images Holdings here for free.

How Are Returns Trending?

There hasn't been much to report for Getty Images Holdings' returns and its level of capital employed because both metrics have been steady for the past one year. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Getty Images Holdings in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

In Conclusion...

We can conclude that in regards to Getty Images Holdings' returns on capital employed and the trends, there isn't much change to report on. And in the last year, the stock has given away 49% so the market doesn't look too hopeful on these trends strengthening any time soon. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

If you'd like to know about the risks facing Getty Images Holdings, we've discovered 2 warning signs that you should be aware of.

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.