The Returns At Duckhorn Portfolio (NYSE:NAPA) Aren't Growing

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at Duckhorn Portfolio (NYSE:NAPA) and its ROCE trend, we weren't exactly thrilled.

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. Analysts use this formula to calculate it for Duckhorn Portfolio:

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

0.075 = US$93m ÷ (US$1.3b - US$77m) (Based on the trailing twelve months to April 2023).

Thus, Duckhorn Portfolio has an ROCE of 7.5%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 16%.

Check out our latest analysis for Duckhorn Portfolio

Above you can see how the current ROCE for Duckhorn Portfolio 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.

The Trend Of ROCE

There hasn't been much to report for Duckhorn Portfolio's returns and its level of capital employed because both metrics have been steady for the past three years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Duckhorn Portfolio in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

Our Take On Duckhorn Portfolio's ROCE

We can conclude that in regards to Duckhorn Portfolio's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 30% over the last year, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

Duckhorn Portfolio could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

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.