Return Trends At B&G Foods (NYSE:BGS) Aren't Appealing

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. However, after investigating B&G Foods (NYSE:BGS), we don't think it's current trends fit the mold of a multi-bagger.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for B&G Foods, this is the formula:

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

0.076 = US$219m ÷ (US$3.4b - US$538m) (Based on the trailing twelve months to September 2024).

So, B&G Foods has an ROCE of 7.6%. In absolute terms, that's a low return and it also under-performs the Food industry average of 10%.

See our latest analysis for B&G Foods

Above you can see how the current ROCE for B&G Foods compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering B&G Foods for free.

What The Trend Of ROCE Can Tell Us

Things have been pretty stable at B&G Foods, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect B&G Foods to be a multi-bagger going forward. That being the case, it makes sense that B&G Foods has been paying out 104% of its earnings to its shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.

Our Take On B&G Foods' ROCE

In a nutshell, B&G Foods has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has declined 35% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think B&G Foods has the makings of a multi-bagger.

One more thing: We've identified 2 warning signs with B&G Foods (at least 1 which is a bit concerning) , 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.

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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.