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Hain Celestial Group (NASDAQ:HAIN) Hasn't Managed To Accelerate Its Returns

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·3 min read
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What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. Although, when we looked at Hain Celestial Group (NASDAQ:HAIN), it didn't seem to tick all of these boxes.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Hain Celestial Group:

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

0.094 = US$178m ÷ (US$2.3b - US$366m) (Based on the trailing twelve months to December 2020).

Thus, Hain Celestial Group has an ROCE of 9.4%. In absolute terms, that's a low return but it's around the Food industry average of 8.4%.

Check out our latest analysis for Hain Celestial Group


Above you can see how the current ROCE for Hain Celestial Group 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 Hain Celestial Group.

What Does the ROCE Trend For Hain Celestial Group Tell Us?

We've noticed that although returns on capital are flat over the last five years, the amount of capital employed in the business has fallen 35% in that same period. When a company effectively decreases its assets base, it's not usually a sign to be optimistic on that company. In addition to that, since the ROCE doesn't scream "quality" at 9.4%, it's hard to get excited about these developments.

The Key Takeaway

Overall, we're not ecstatic to see Hain Celestial Group reducing the amount of capital it employs in the business. 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 Hain Celestial Group has the makings of a multi-bagger.

Hain Celestial Group does have some risks though, and we've spotted 1 warning sign for Hain Celestial Group that you might be interested in.

While Hain Celestial Group 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.

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.

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