The Returns At Fresh Del Monte Produce (NYSE:FDP) Aren't Growing

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Fresh Del Monte Produce (NYSE:FDP), it didn't seem to tick all of these boxes.

What Is 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 Fresh Del Monte Produce is:

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

0.054 = US$154m ÷ (US$3.4b - US$603m) (Based on the trailing twelve months to March 2023).

So, Fresh Del Monte Produce has an ROCE of 5.4%. In absolute terms, that's a low return and it also under-performs the Food industry average of 9.7%.

View our latest analysis for Fresh Del Monte Produce

Above you can see how the current ROCE for Fresh Del Monte Produce 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 Fresh Del Monte Produce here for free.

What The Trend Of ROCE Can Tell Us

There hasn't been much to report for Fresh Del Monte Produce's returns and its level of capital employed because both metrics have been steady for the past 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 Fresh Del Monte Produce to be a multi-bagger going forward.

In Conclusion...

We can conclude that in regards to Fresh Del Monte Produce's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 38% over the last five years, investors may not be too optimistic on this trend improving either. 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.

Fresh Del Monte Produce does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those can't be ignored...

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.