Hamilton Beach Brands Holding (NYSE:HBB) Will Want To Turn Around Its Return Trends

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Hamilton Beach Brands Holding (NYSE:HBB), it didn't seem to tick all of these boxes.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Hamilton Beach Brands Holding, this is the formula:

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

0.14 = US$36m ÷ (US$364m - US$105m) (Based on the trailing twelve months to June 2025).

So, Hamilton Beach Brands Holding has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 13% generated by the Consumer Durables industry.

View our latest analysis for Hamilton Beach Brands Holding

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hamilton Beach Brands Holding's ROCE against it's prior returns. If you'd like to look at how Hamilton Beach Brands Holding has performed in the past in other metrics, you can view this free graph of Hamilton Beach Brands Holding's past earnings, revenue and cash flow.

What Does the ROCE Trend For Hamilton Beach Brands Holding Tell Us?

When we looked at the ROCE trend at Hamilton Beach Brands Holding, we didn't gain much confidence. Around five years ago the returns on capital were 48%, but since then they've fallen to 14%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

On a related note, Hamilton Beach Brands Holding has decreased its current liabilities to 29% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.

The Bottom Line On Hamilton Beach Brands Holding's ROCE

To conclude, we've found that Hamilton Beach Brands Holding is reinvesting in the business, but returns have been falling. And investors appear hesitant that the trends will pick up because the stock has fallen 21% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

Hamilton Beach Brands Holding does have some risks though, and we've spotted 1 warning sign for Hamilton Beach Brands Holding that you might be interested in.

While Hamilton Beach Brands Holding may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.