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If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think USANA Health Sciences (NYSE:USNA) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
Understanding Return On Capital Employed (ROCE)
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested 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)
0.11 = US$66m ÷ (US$748m - US$140m) (Based on the trailing twelve months to December 2024).
Thus, USANA Health Sciences has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.
See our latest analysis for USANA Health Sciences
In the above chart we have measured USANA Health Sciences' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for USANA Health Sciences .
What Can We Tell From USANA Health Sciences' ROCE Trend?
When we looked at the ROCE trend at USANA Health Sciences, we didn't gain much confidence. Around five years ago the returns on capital were 38%, but since then they've fallen to 11%. However it looks like USANA Health Sciences might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.
Our Take On USANA Health Sciences' ROCE
In summary, USANA Health Sciences is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 64% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.