Yahoo Finance Returns Are Gaining Momentum At Integral Ad Science Holding (NASDAQ:IAS)
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Integral Ad Science Holding (NASDAQ:IAS) and its trend of ROCE, we really liked what we saw.
Understanding 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. The formula for this calculation on Integral Ad Science Holding is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0097 = US$11m ÷ (US$1.1b - US$53m) (Based on the trailing twelve months to March 2024).
Therefore, Integral Ad Science Holding has an ROCE of 1.0%. Ultimately, that's a low return and it under-performs the Media industry average of 11%.
View our latest analysis for Integral Ad Science Holding
Above you can see how the current ROCE for Integral Ad Science Holding 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 Integral Ad Science Holding for free.
What Can We Tell From Integral Ad Science Holding's ROCE Trend?
We're delighted to see that Integral Ad Science Holding is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making four years ago but is is now generating 1.0% on its capital. And unsurprisingly, like most companies trying to break into the black, Integral Ad Science Holding is utilizing 31% more capital than it was four years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.
Our Take On Integral Ad Science Holding's ROCE
Overall, Integral Ad Science Holding gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Given the stock has declined 48% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
If you want to continue researching Integral Ad Science Holding, you might be interested to know about the 3 warning signs that our analysis has discovered.
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.
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