RingCentral, Inc. (NYSE:RNG) is a prominent player in the cloud-based communications and collaboration solutions industry. The company provides a comprehensive suite of products that enable businesses to communicate and collaborate effectively. RingCentral competes with other tech companies like Five9, Inc., Okta, Inc., HubSpot, Inc., Zscaler, Inc., and ServiceNow, Inc., each offering unique solutions in the tech space.
In evaluating RingCentral's financial performance, the Return on Invested Capital (ROIC) is a critical metric. RingCentral's ROIC stands at 0.85%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 10.45%. This indicates that the company is not generating returns that exceed its cost of capital, which is a concern for investors looking for efficient capital utilization.
Comparing RingCentral to its peers, Five9, Inc. has a ROIC of -3.25% and a WACC of 6.98%, resulting in a ROIC to WACC ratio of -0.47. Similarly, Okta, Inc. has a ROIC of -3.36% and a WACC of 8.50%, with a ratio of -0.40. Both companies, like RingCentral, are not generating returns that cover their cost of capital, indicating inefficiencies in capital utilization.
HubSpot, Inc. and Zscaler, Inc. also show negative ROIC figures, with HubSpot at -0.47% and Zscaler at -23.43%. Their WACC figures are 11.95% and 8.03%, respectively, leading to ROIC to WACC ratios of -0.04 and -2.92. These figures suggest that these companies are also struggling to generate returns that exceed their cost of capital.
ServiceNow, Inc. is the standout among RingCentral's peers, with a ROIC of 9.22% and a WACC of 8.71%, resulting in a positive ROIC to WACC ratio of 1.06. This indicates that ServiceNow is effectively generating returns that exceed its cost of capital, making it the most efficient in capital utilization among the listed companies.
