To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. However, after briefly looking over the numbers, we don't think Getty Images Holdings (NYSE:GETY) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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 Getty Images Holdings, this is the formula:

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

0.092 = US$199m ÷ (US$2.6b - US$427m) (Based on the trailing twelve months to September 2024).

Thus, Getty Images Holdings has an ROCE of 9.2%. In absolute terms, that's a low return, but it's much better than the Interactive Media and Services industry average of 6.7%.

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're interested, you can view the analysts predictions in our free analyst report for Getty Images Holdings .

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

Things have been pretty stable at Getty Images Holdings, with its capital employed and returns on that capital staying somewhat the same for the last three years. 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.

The Bottom Line 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 65% so the market doesn't look too hopeful on these trends strengthening any time soon. 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.

If you'd like to know more about Getty Images Holdings, we've spotted 3 warning signs, and 1 of them is significant.

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.