Returns Are Gaining Momentum At Scandinavian Astor Group (FRA:Y73)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Scandinavian Astor Group (FRA:Y73) and its trend of ROCE, we really liked what we saw.

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What Is 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. The formula for this calculation on Scandinavian Astor Group is:

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

0.025 = kr8.7m ÷ (kr473m - kr124m) (Based on the trailing twelve months to March 2025).

Thus, Scandinavian Astor Group has an ROCE of 2.5%. Ultimately, that's a low return and it under-performs the Aerospace & Defense industry average of 13%.

Check out our latest analysis for Scandinavian Astor Group

In the above chart we have measured Scandinavian Astor Group's 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 Scandinavian Astor Group .

How Are Returns Trending?

The fact that Scandinavian Astor Group is now generating some pre-tax profits from its prior investments is very encouraging. About one year ago the company was generating losses but things have turned around because it's now earning 2.5% on its capital. And unsurprisingly, like most companies trying to break into the black, Scandinavian Astor Group is utilizing 89% more capital than it was one year ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

What We Can Learn From Scandinavian Astor Group's ROCE

Long story short, we're delighted to see that Scandinavian Astor Group's reinvestment activities have paid off and the company is now profitable. And a remarkable 250% total return over the last year tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to know some of the risks facing Scandinavian Astor Group we've found 3 warning signs (2 are a bit unpleasant!) that you should be aware of before investing here.

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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.