Hain Celestial Group (NASDAQ:HAIN) Hasn't Managed To Accelerate Its Returns

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at Hain Celestial Group (NASDAQ:HAIN), it didn't seem to tick all of these boxes.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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

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)

0.057 = US$89m ÷ (US$1.8b - US$305m) (Based on the trailing twelve months to March 2025).

So, Hain Celestial Group has an ROCE of 5.7%. In absolute terms, that's a low return and it also under-performs the Food industry average of 10%.

See our latest analysis for Hain Celestial Group

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 .

So How Is Hain Celestial Group's ROCE Trending?

Over the past five years, Hain Celestial Group's ROCE has remained relatively flat while the business is using 20% less capital than before. This indicates to us that assets are being sold and thus the business is likely shrinking, which you'll remember isn't the typical ingredients for an up-and-coming multi-bagger. Not only that, but the low returns on this capital mentioned earlier would leave most investors unimpressed.

The Key Takeaway

It's a shame to see that Hain Celestial Group is effectively shrinking in terms of its capital base. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 95% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One more thing: We've identified 2 warning signs with Hain Celestial Group (at least 1 which doesn't sit too well with us) , and understanding them would certainly be useful.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.