If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Hain Celestial Group (NASDAQ:HAIN), it didn't seem to tick all of these boxes.
What Is Return On Capital Employed (ROCE)?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Hain Celestial Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.049 = US$91m ÷ (US$2.1b - US$281m) (Based on the trailing twelve months to September 2024).
Thus, Hain Celestial Group has an ROCE of 4.9%. Ultimately, that's a low return and it under-performs the Food industry average of 11%.
Above you can see how the current ROCE for Hain Celestial Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Hain Celestial Group .
What The Trend Of ROCE Can Tell Us
Things have been pretty stable at Hain Celestial Group, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Hain Celestial Group to be a multi-bagger going forward.
The Bottom Line On Hain Celestial Group's ROCE
In a nutshell, Hain Celestial Group has been trudging along with the same returns from the same amount of capital over the last five years. And in the last five years, the stock has given away 67% so the market doesn't look too hopeful on these trends strengthening any time soon. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.
Hain Celestial Group does have some risks though, and we've spotted 1 warning sign for Hain Celestial Group that you might be interested in.
While Hain Celestial Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
