Investors Will Want LiveRamp Holdings' (NYSE:RAMP) Growth In ROCE To Persist

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at LiveRamp Holdings (NYSE:RAMP) and its trend of ROCE, we really liked what we saw.

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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. Analysts use this formula to calculate it for LiveRamp Holdings:

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

0.013 = US$13m ÷ (US$1.3b - US$248m) (Based on the trailing twelve months to March 2025).

Therefore, LiveRamp Holdings has an ROCE of 1.3%. In absolute terms, that's a low return and it also under-performs the Software industry average of 9.6%.

See our latest analysis for LiveRamp Holdings

Above you can see how the current ROCE for LiveRamp Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering LiveRamp Holdings for free.

How Are Returns Trending?

We're delighted to see that LiveRamp Holdings is reaping rewards from its investments and has now broken into profitability. The company now earns 1.3% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by LiveRamp Holdings has remained flat over the period. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Key Takeaway

As discussed above, LiveRamp Holdings appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Astute investors may have an opportunity here because the stock has declined 40% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

Like most companies, LiveRamp Holdings does come with some risks, and we've found 1 warning sign that you should be aware of.

While LiveRamp Holdings 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.