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

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Getty Images Holdings (NYSE:GETY) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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 Getty Images Holdings, this is the formula:

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

0.095 = US$199m ÷ (US$2.5b - US$408m) (Based on the trailing twelve months to September 2023).

So, Getty Images Holdings has an ROCE of 9.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.0%.

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Getty Images Holdings Tell Us?

Over the past two years, Getty Images Holdings' ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Getty Images Holdings to be a multi-bagger going forward.

The Bottom Line On Getty Images Holdings' ROCE

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 investors appear hesitant that the trends will pick up because the stock has fallen 53% in the last three years. Therefore based on the analysis done in this article, we don't think Getty Images Holdings has the makings of a multi-bagger.

On a final note, we've found 1 warning sign for Getty Images Holdings that we think you should be aware of.

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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.