Stock Analysis

Returns Are Gaining Momentum At Nature's Sunshine Products (NASDAQ:NATR)

NasdaqCM:NATR
Source: Shutterstock

There are a few key trends to look for if we want to identify the next multi-bagger. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Nature's Sunshine Products' (NASDAQ:NATR) returns on capital, so let's have a look.

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 Nature's Sunshine Products is:

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

0.13 = US$22m ÷ (US$246m - US$83m) (Based on the trailing twelve months to March 2021).

Thus, Nature's Sunshine Products has an ROCE of 13%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Personal Products industry average of 16%.

Check out our latest analysis for Nature's Sunshine Products

roce
NasdaqCM:NATR Return on Capital Employed May 19th 2021

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Nature's Sunshine Products has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Nature's Sunshine Products' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 21% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line

To bring it all together, Nature's Sunshine Products has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 127% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a separate note, we've found 2 warning signs for Nature's Sunshine Products you'll probably want to know about.

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.

When trading Nature's Sunshine Products or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Valuation is complex, but we're here to simplify it.

Discover if Nature's Sunshine Products might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

Access Free Analysis

This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

About NasdaqCM:NATR

Nature's Sunshine Products

A natural health and wellness company, manufactures and sells nutritional and personal care products in Asia, Europe, North America, Latin America, and internationally.

Flawless balance sheet and undervalued.

Community Narratives

Priced for AI perfection - cracks are emerging
Fair Value US$90.15|47.31% overvalued
ChadWisperer
ChadWisperer
Community Contributor
NVDA Market Outlook
Fair Value US$341.12|61.068999999999996% undervalued
NateF
NateF
Community Contributor
Karoon Energy (ASX:KAR) - Buy Baby Buy 🚀
Fair Value AU$5.10|70.392% undervalued
StockMan
StockMan
Community Contributor