When researching a stock for investment, what can tell us that the company is in decline? Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. And from a first read, things don't look too good at Tyson Foods (NYSE:TSN), so let's see why.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Tyson Foods, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.027 = US$847m ÷ (US$37b - US$5.6b) (Based on the trailing twelve months to March 2024).
So, Tyson Foods has an ROCE of 2.7%. Ultimately, that's a low return and it under-performs the Food industry average of 11%.
NYSE:TSN Return on Capital Employed June 16th 2024
Above you can see how the current ROCE for Tyson Foods compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Tyson Foods for free.
How Are Returns Trending?
There is reason to be cautious about Tyson Foods, given the returns are trending downwards. To be more specific, the ROCE was 11% five years ago, but since then it has dropped noticeably. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Tyson Foods becoming one if things continue as they have.
The Bottom Line
In summary, it's unfortunate that Tyson Foods is generating lower returns from the same amount of capital. It should come as no surprise then that the stock has fallen 22% over the last five years, so it looks like investors are recognizing these changes. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.
One more thing, we've spotted 2 warning signs facing Tyson Foods that you might find interesting.
While Tyson Foods 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.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
投資用株式の調査を行う場合、会社が衰退していることを示すものは何ですか?通常、資本運用の両方の傾向を見ることができます。 これは、会社が投資から利益を減らし、総資産が減少していることを示しています。 そのため、早めに Carnival Corporation&(NYSE:CCL)をみると、苦戦しているかもしれないという兆候が見られたので、調査してみましょう。資本利回り (ROCE)とは何ですか?わからない方には、ROCEは企業が事業に使用する資本から、税引き前利益をどれだけ生成できるかを測定します。アナリストは以下の式を使用して、Bumi Armada BerhadのROCEを計算します。「ROCE = 利息や税金を除いた利益 (EBIT) ÷ (総資産 - 流動負債)」。投下資本利益率(ROCE)としても知られるROCEは、ビジネスに投下された資本に対する、企業の年間純利益(収益)の指標です。Gadang Holdings Berhadのこの指標を計算するには、次の式を使用します。Bumi Armada Berhadが前のROCEと前のパフォーマンスを比較した上図では、将来のROCEがより重要であるとされています。もし興味がある場合は、Bumi Armada Berhadの無料アナリストレポートをご覧いただけます。資本投下利回りの低下。このような傾向は、事業が投資を減らし、投資した資本に対する収益も減少していることを意味しています。そして初めの読みでは、タイソンフーズ(nyse:TSN)の状況はあまり良く見えませんので、掘り下げて見てみましょう。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。