Huntsman (NYSE: NYSE:HUN), a player in the chemicals industry, has been exhibiting signs of decline, marked by a falling Return on Capital Employed (ROCE) and a diminishing capital base. The company's current ROCE stands at 4.5%, significantly underperforming the industry average of 11%.
Historical analysis of Huntsman's performance reveals a drop in ROCE from 13% five years ago. This shows that despite employing the same amount of capital over the last five years, the company's net assets and returns are shrinking.
Analysts' forecasts paint a picture of Huntsman as a mature business with limited prospects for substantial growth, thus reducing its potential to become a multi-bagger. The ROCE, calculated using Earnings Before Interest and Tax (EBIT), Total Assets, and Current Liabilities, is an important indicator of how efficiently a company is using its capital to generate profits.
The declining trend in Huntsman's ROCE suggests that the company may be struggling to generate sufficient returns on its capital employed, which could impact its future growth prospects. As such, the company's position within the competitive chemicals industry could be weakened if it continues on this trajectory.
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