Church & Dwight's (NYSE:CHD) Returns Have Hit A Wall

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. With that in mind, the ROCE of Church & Dwight (NYSE:CHD) looks decent, right now, so lets see what the trend of returns can tell us.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Church & Dwight, this is the formula:

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

0.14 = US$1.1b ÷ (US$8.8b - US$1.2b) (Based on the trailing twelve months to June 2025).

Therefore, Church & Dwight has an ROCE of 14%. In absolute terms, that's a pretty standard return but compared to the Household Products industry average it falls behind.

View our latest analysis for Church & Dwight

In the above chart we have measured Church & Dwight's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Church & Dwight .

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 14% and the business has deployed 28% more capital into its operations. 14% is a pretty standard return, and it provides some comfort knowing that Church & Dwight has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

In the end, Church & Dwight has proven its ability to adequately reinvest capital at good rates of return. However, over the last five years, the stock has only delivered a 9.5% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

If you'd like to know about the risks facing Church & Dwight, we've discovered 2 warning signs that you should be aware of.

While Church & Dwight may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.