The Returns At Getty Images Holdings (NYSE:GETY) Aren't Growing
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. 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)?
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)
0.083 = US$179m ÷ (US$2.6b - US$422m) (Based on the trailing twelve months to March 2024).
Therefore, Getty Images Holdings has an ROCE of 8.3%. On its own that's a low return, but compared to the average of 6.4% generated by the Interactive Media and Services industry, it's much better.
Check out our latest analysis for Getty Images Holdings
Above you can see how the current ROCE for Getty Images Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Getty Images Holdings .
What Does the ROCE Trend For Getty Images Holdings Tell Us?
Over the past three years, Getty Images Holdings' ROCE and capital employed have both remained mostly flat. 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.
The Bottom Line
In a nutshell, Getty Images Holdings has been trudging along with the same returns from the same amount of capital over the last three years. And investors appear hesitant that the trends will pick up because the stock has fallen 64% in the last three years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.
One more thing: We've identified 3 warning signs with Getty Images Holdings (at least 1 which is significant) , and understanding them would certainly be useful.
While Getty Images Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
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