Freshpet Inc (FRPT)

Return on total capital

		Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	21,413	46,027	50,027	32,312	21,314	-7,843	-26,927	-39,627	-45,482	-40,847	-57,698	-42,888	-30,857	-24,650	-20,114	-13,669	-5,328	1,530	9,637	7,565
Long-term debt	US$ in thousands	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	1,049,490	1,055,360	1,021,450	995,804	977,844	953,454	938,556	937,784	948,907	1,031,570	1,029,940	1,032,670	708,054	719,754	723,518	719,811	721,396	394,169	394,489	384,591
Return on total capital		2.04%	4.36%	4.90%	3.24%	2.18%	-0.82%	-2.87%	-4.23%	-4.79%	-3.96%	-5.60%	-4.15%	-4.36%	-3.42%	-2.78%	-1.90%	-0.74%	0.39%	2.44%	1.97%

March 31, 2025 calculation

Return on total capital = EBIT (ttm) ÷ (Long-term debt + Total stockholders’ equity)
= $21,413K ÷ ($—K + $1,049,490K)
= 2.04%

The analysis of Freshpet Inc.'s return on total capital (ROTC) over the specified period reveals a significant trajectory of decline followed by a recent recovery. Initially, as of June 30, 2020, the ROTC stood at approximately 1.97%, indicating a modest level of efficiency in generating profits from the firm's total capital. Throughout the subsequent quarters of 2020, the ratio experienced an upward movement, peaking at 2.44% by September 30, 2020, which suggests a period of improved operational efficiency and capacity utilization.

However, starting in December 2020, there was a notable decline to 0.39%, and this downtrend persisted into 2021, with the ROTC entering negative territory at -0.74% by March 31, 2021. The negative figures continued to deepen, with the ratio reaching -4.36% by March 31, 2022, and stabilizing around -5.60% at the end of September 2022. This prolonged period of negative Turkey indicates considerable challenges in generating adequate returns on total capital, likely reflecting operational losses, inefficiencies, or strategic difficulties during that timeframe.

From late 2022, a gradual improvement commenced, with the ROTC moving closer to zero—recording -0.82% as of December 31, 2023—and ultimately turning positive at 2.18% by March 31, 2024. The subsequent quarters show a strengthening of this upward trend, with the ratio reaching as high as 4.90% on September 30, 2024, before slightly moderating to 4.36% by the end of that year, and then declining somewhat to 2.04% by March 31, 2025.

Overall, the company's return on total capital demonstrates a trajectory from initial modest profitability, deep losses and negative returns spanning over a year and a half, and a recent notable recovery into positive territory. This pattern indicates that Freshpet Inc. has faced significant operational challenges during the earlier period but has shown signs of improving efficiency and profitability in the most recent quarters.