Consumer Durables News

Fiskars Oyj Abp (HEL:FSKRS) Might Have The Makings Of A Multi-Bagger

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There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we’ll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company’s amount 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. Speaking of which, we noticed some great changes in Fiskars Oyj Abp’s (HEL:FSKRS) returns on capital, so let’s have a look.

Return On Capital Employed (ROCE): What Is It?

For those that aren’t sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Fiskars Oyj Abp:

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

0.15 = €137m ÷ (€1.5b – €540m) (Based on the trailing twelve months to March 2022).

So, Fiskars Oyj Abp has an ROCE of 15%. On its own, that’s a standard return, however it’s much better than the 12% generated by the Consumer Durables industry.

Check out our latest analysis for Fiskars Oyj Abp

roce
HLSE:FSKRS Return on Capital Employed July 28th 2022

Above you can see how the current ROCE for Fiskars Oyj Abp compares to its prior returns on capital, but there’s only so much you can tell from the past. If you’re interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

You’d find it hard not to be impressed with the ROCE trend at Fiskars Oyj Abp. The figures show that over the last five years, returns on capital have grown by 196%. The company is now earning €0.1 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it’s applying 38% less capital than it was five years ago. A business that’s shrinking its asset base like this isn’t usually typical of a soon to be multi-bagger company.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Effectively this means that suppliers or short-term creditors are now funding 37% of the business, which is more than it was five years ago. It’s worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

Our Take On Fiskars Oyj Abp’s ROCE

In the end, Fiskars Oyj Abp has proven it’s capital allocation skills are good with those higher returns from less amount of capital. Considering the stock has delivered 34% to its stockholders over the last five years, it may be fair to think that investors aren’t fully aware of the promising trends yet. Given that, we’d look further into this stock in case it has more traits that could make it multiply in the long term.

On a separate note, we’ve found 1 warning sign for Fiskars Oyj Abp you’ll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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.

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