The Return Trends At LiveRamp Holdings (NYSE:RAMP) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So when we looked at LiveRamp Holdings (NYSE:RAMP) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for LiveRamp Holdings, this is the formula:

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

0.017 = US$18m ÷ (US$1.2b - US$190m) (Based on the trailing twelve months to June 2024).

So, LiveRamp Holdings has an ROCE of 1.7%. In absolute terms, that's a low return and it also under-performs the Software industry average of 8.6%.

Check out 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.

What The Trend Of ROCE Can Tell Us

We're delighted to see that LiveRamp Holdings is reaping rewards from its investments and has now broken into profitability. While the business is profitable now, it used to be incurring losses on invested capital five years ago. Additionally, the business is utilizing 23% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. This could potentially mean that the company is selling some of its assets.

What We Can Learn From LiveRamp Holdings' ROCE

In summary, it's great to see that LiveRamp Holdings has been able to turn things around and earn higher returns on lower amounts of capital. And since the stock has fallen 36% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

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

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.