Traeger (NYSE:COOK) Has Some Difficulty Using Its Capital Effectively

To avoid investing in a business that's in decline, there's a few financial metrics that can provide early indications of aging. When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. Ultimately this means that the company is earning less per dollar invested and on top of that, it's shrinking its base of capital employed. On that note, looking into Traeger (NYSE:COOK), we weren't too upbeat about how things were going.

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Understanding 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 Traeger is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.00076 = US$541k ÷ (US$826m - US$115m) (Based on the trailing twelve months to March 2025).

Therefore, Traeger has an ROCE of 0.08%. Ultimately, that's a low return and it under-performs the Consumer Durables industry average of 14%.

View our latest analysis for Traeger

Above you can see how the current ROCE for Traeger 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 Traeger .

What Does the ROCE Trend For Traeger Tell Us?

We are a bit worried about the trend of returns on capital at Traeger. About five years ago, returns on capital were 2.5%, however they're now substantially lower than that as we saw above. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Traeger to turn into a multi-bagger.

Our Take On Traeger's ROCE

In summary, it's unfortunate that Traeger is generating lower returns from the same amount of capital. It should come as no surprise then that the stock has fallen 53% over the last three years, so it looks like investors are recognizing these changes. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.

Like most companies, Traeger does come with some risks, and we've found 2 warning signs that you should be aware of.

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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.