Slowing Rates Of Return At Hain Celestial Group (NASDAQ:HAIN) Leave Little Room For Excitement

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. However, after investigating Hain Celestial Group (NASDAQ:HAIN), we don't think it's current trends fit the mold of a multi-bagger.

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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 Hain Celestial Group is:

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

0.05 = US$84m ÷ (US$2.0b - US$289m) (Based on the trailing twelve months to December 2024).

Thus, Hain Celestial Group has an ROCE of 5.0%. Ultimately, that's a low return and it under-performs the Food industry average of 10%.

See our latest analysis for Hain Celestial Group

In the above chart we have measured Hain Celestial Group's prior ROCE against its prior performance, but the future is arguably more important. 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 Can We Tell From Hain Celestial Group's ROCE Trend?

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. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. 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.

In Conclusion...

We can conclude that in regards to Hain Celestial Group's returns on capital employed and the trends, there isn't much change to report on. And investors may be expecting the fundamentals to get a lot worse because the stock has crashed 85% over the last five years. Therefore based on the analysis done in this article, we don't think Hain Celestial Group has the makings of a multi-bagger.

Hain Celestial Group does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

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.