Elastic N.V. (NYSE:ESTC) is a company known for its search-powered solutions, including the popular Elastic Stack, which comprises Elasticsearch, Kibana, Beats, and Logstash. These tools are widely used for data search, logging, and analytics. Elastic operates in a competitive landscape with peers like MongoDB, Smartsheet, Alteryx, Datadog, and HubSpot, all of which offer various data and analytics solutions.
Elastic's Return on Invested Capital (ROIC) is -10.46%, which is concerning as it indicates the company is not generating returns above its Weighted Average Cost of Capital (WACC) of 9.41%. This negative ROIC suggests that Elastic is not efficiently utilizing its capital, which could be a red flag for investors. The ROIC to WACC ratio of -1.11 further highlights this inefficiency.
Comparatively, MongoDB has a ROIC of -7.36% and a WACC of 9.75%, resulting in a ROIC to WACC ratio of -0.76. Smartsheet's ROIC is -5.88% with a WACC of 7.92%, leading to a ratio of -0.74. Alteryx shows a ROIC of -8.11% against a WACC of 5.84%, with a ratio of -1.39. These figures indicate that these companies, like Elastic, are also struggling to generate returns above their cost of capital.
Datadog, however, stands out with a positive ROIC of 1.24% and a WACC of 9.55%, resulting in a ROIC to WACC ratio of 0.13. This positive ratio suggests that Datadog is effectively generating returns above its cost of capital, making it more attractive to investors. In contrast, HubSpot has a ROIC of -0.47% and a WACC of 12.39%, with a ratio of -0.04, indicating a slight inefficiency in capital utilization.
Overall, while Elastic and most of its peers are currently operating with negative ROICs, Datadog's positive return on invested capital relative to its cost suggests better financial health and growth potential. Investors may find Datadog more appealing due to its efficient capital utilization.
