Here's What To Make Of USANA Health Sciences' (NYSE:USNA) Decelerating Rates Of Return

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. Having said that, while the ROCE is currently high for USANA Health Sciences (NYSE:USNA), we aren't jumping out of our chairs because returns are decreasing.

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 USANA Health Sciences:

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

0.32 = US$135m ÷ (US$558m - US$134m) (Based on the trailing twelve months to July 2022).

So, USANA Health Sciences has an ROCE of 32%. In absolute terms that's a great return and it's even better than the Personal Products industry average of 17%.

Check out the opportunities and risks within the US Personal Products industry.

Above you can see how the current ROCE for USANA Health Sciences compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for USANA Health Sciences.

The Trend Of ROCE

Things have been pretty stable at USANA Health Sciences, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So it may not be a multi-bagger in the making, but given the decent 32% return on capital, it'd be difficult to find fault with the business's current operations.

The Bottom Line On USANA Health Sciences' ROCE

In summary, USANA Health Sciences isn't compounding its earnings but is generating decent returns on the same amount of capital employed. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. Therefore based on the analysis done in this article, we don't think USANA Health Sciences has the makings of a multi-bagger.

USANA Health Sciences does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.