- Pinterest’s Return on Invested Capital (ROIC) of 24.79% significantly exceeds its Weighted Average Cost of Capital (WACC) of 8.29%, indicating efficient capital utilization.
- Compared to peers, Pinterest’s ROIC to WACC ratio of 2.99 showcases its superior value creation for shareholders.
- DocuSign, Inc. (DOCU) has the highest ROIC to WACC ratio among peers, highlighting its exceptional efficiency in generating returns relative to its cost of capital.
Pinterest, Inc. (NYSE:PINS) is a social media company that stands out in the digital landscape by offering a unique visual discovery engine. Unlike its competitors such as Facebook and Instagram, Pinterest focuses on helping users discover and save ideas through images and videos. The platform’s business model is primarily based on advertising revenue, which hinges on user engagement and its ability to attract advertisers.
In assessing Pinterest’s financial health, two critical metrics are considered: the Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). Pinterest boasts a ROIC of 24.79%, which significantly outperforms its WACC of 8.29%, resulting in a ROIC to WACC ratio of 2.99. This impressive ratio not only demonstrates Pinterest’s efficient capital utilization but also its robust value creation for shareholders.
When juxtaposed with its industry counterparts, Pinterest’s financial efficiency becomes even more evident. For example, Zoom Video Communications, Inc. (ZM) presents a ROIC of 6.71% against a WACC of 7.75%, leading to a ROIC to WACC ratio of 0.87. This comparison suggests that Zoom is not as effective as Pinterest in generating returns above its cost of capital. Similarly, Etsy, Inc. (ETSY), CrowdStrike Holdings, Inc. (CRWD), and Roku, Inc. (ROKU) exhibit lower ROIC to WACC ratios, indicating less efficient capital management in comparison to Pinterest.
However, DocuSign, Inc. (DOCU) emerges as a standout with a ROIC to WACC ratio of 4.80, the highest among the analyzed peers. With a ROIC of 44.84% and a WACC of 9.35%, DocuSign exemplifies exceptional efficiency in generating returns relative to its cost of capital, surpassing even Pinterest’s commendable performance.
