Returns On Capital At Getty Images Holdings (NYSE:GETY) Have Hit The Brakes

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Getty Images Holdings (NYSE:GETY), it didn't seem to tick all of these boxes.

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

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

0.088 = US$188m ÷ (US$2.6b - US$426m) (Based on the trailing twelve months to June 2024).

Therefore, Getty Images Holdings has an ROCE of 8.8%. In absolute terms, that's a low return, but it's much better than the Interactive Media and Services industry average of 6.3%.

See 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 to see what analysts are forecasting going forward, you should check out our free analyst report for Getty Images Holdings .

What Can We Tell From Getty Images Holdings' ROCE Trend?

Over the past three 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. So don't be surprised if Getty Images Holdings doesn't end up being a multi-bagger in a few years time.

Our Take On Getty Images Holdings' ROCE

In summary, Getty Images Holdings isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And in the last three years, the stock has given away 61% so the market doesn't look too hopeful on these trends strengthening any time soon. 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 found 3 warning signs for Getty Images Holdings (1 is significant) 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.