Investors Met With Slowing Returns on Capital At Hain Celestial Group (NASDAQ:HAIN)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Hain Celestial Group, this is the formula:

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

0.059 = US$130m ÷ (US$2.5b - US$269m) (Based on the trailing twelve months to June 2022).

So, Hain Celestial Group has an ROCE of 5.9%. Ultimately, that's a low return and it under-performs the Food industry average of 9.5%.

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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From Hain Celestial Group's ROCE Trend?

Over the past five years, Hain Celestial Group's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at Hain Celestial Group in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Bottom Line On Hain Celestial Group's ROCE

In summary, Hain Celestial Group isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has declined 46% over the last five years, investors may not be too optimistic on this trend improving either. 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.

Like most companies, Hain Celestial Group does come with some risks, and we've found 1 warning sign that you should be aware of.

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.