Returns On Capital Are Showing Encouraging Signs At Conagra Brands (NYSE:CAG)

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Conagra Brands (NYSE:CAG) looks quite promising in regards to its trends of return on capital.

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

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. The formula for this calculation on Conagra Brands is:

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

0.11 = US$1.8b ÷ (US$21b - US$4.3b) (Based on the trailing twelve months to February 2025).

Therefore, Conagra Brands has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.

View our latest analysis for Conagra Brands

In the above chart we have measured Conagra Brands' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Conagra Brands for free.

What Does the ROCE Trend For Conagra Brands Tell Us?

Conagra Brands is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 23% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Conagra Brands' ROCE

In summary, we're delighted to see that Conagra Brands has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 13% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Like most companies, Conagra Brands does come with some risks, and we've found 4 warning signs that you should be aware of.

While Conagra Brands 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.