- Pinterest’s ROIC of 24.79% is significantly higher than its WACC of 7.97%, indicating efficient capital utilization.
- Zoom Video Communications and Etsy show moderate efficiency in capital utilization with ROIC to WACC ratios below Pinterest’s.
- DocuSign leads with the highest ROIC to WACC ratio of 4.59, showcasing exceptional efficiency in generating returns above its cost of capital.
Pinterest, Inc. (NYSE:PINS) is a social media company that allows users to discover and save ideas through images and videos. It competes with other tech companies like Zoom Video Communications, Inc. (ZM), Etsy, Inc. (ETSY), CrowdStrike Holdings, Inc. (CRWD), Roku, Inc. (ROKU), and DocuSign, Inc. (DOCU). These companies operate in different sectors but are often compared based on financial metrics like ROIC and WACC.
Pinterest’s ROIC of 24.79% is significantly higher than its WACC of 7.97%, resulting in a ROIC to WACC ratio of 3.11. This indicates that Pinterest is generating returns well above its cost of capital, which is a positive indicator for investors. A high ROIC to WACC ratio suggests that the company is efficiently using its capital to generate profits.
In comparison, Zoom Video Communications has a ROIC of 7.49% and a WACC of 7.80%, leading to a ROIC to WACC ratio of 0.96. This suggests that Zoom is barely covering its cost of capital, which may concern investors looking for higher returns. Similarly, Etsy’s ROIC of 11.44% against a WACC of 10.08% results in a ratio of 1.13, indicating moderate efficiency in capital utilization.
CrowdStrike and Roku face challenges with their ROIC to WACC ratios. CrowdStrike’s ROIC is only 0.70% compared to a WACC of 9.79%, resulting in a low ratio of 0.07. Roku’s situation is more concerning, with a negative ROIC of -5.81% and a WACC of 13.30%, leading to a negative ratio of -0.44. These figures suggest difficulties in generating returns above their cost of capital.
DocuSign stands out with a ROIC of 44.84% and a WACC of 9.76%, resulting in the highest ROIC to WACC ratio of 4.59 among the peers. This indicates that DocuSign is generating highly efficient returns relative to its cost of capital, making it an attractive option for investors.
