Shutterstock, Inc. is a global technology company that offers a platform for stock photography, footage, music, and creative tools. A key test of its financial performance is its ability to generate returns that are higher than its cost of capital. This comparison helps show if a company is creating or destroying shareholder value.
A company's financial health can be measured by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). ROIC shows how much profit a company makes from its investments. WACC is the average cost the company pays to fund those investments. A company creates value when its ROIC is higher than its WACC, indicating efficient investment returns.
Shutterstock, Inc. currently has a negative ROIC of -16.53%, which is far below its WACC of 7.58%. This negative gap suggests the company is not earning a sufficient return on the capital it has invested. This indicates that for every dollar invested in the business, the company is currently losing money, thereby destroying shareholder value and demonstrating poor capital efficiency.
Looking at its competitors, a different picture emerges for some. TriNet Group, Inc. is a strong performer with an ROIC of 16.01% against a WACC of 7.51%. This shows TriNet Group, Inc. is highly effective at using its capital to generate profits. Other value creators and examples of strong capital efficiency include Installed Building Products (NYSE:IBP) and SPS Commerce (NASDAQ:SPSC).
However, Shutterstock, Inc. is not alone in its struggles. TechTarget, Inc. also shows significant value destruction with an ROIC of -70.52% compared to its WACC of 9.13%. This analysis highlights a clear performance gap among companies within the same industry based on their capital efficiency.
