Stock Analysis

Investors Will Want HusCompagniet's (CPH:HUSCO) Growth In ROCE To Persist

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CPSE:HUSCO
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If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 HusCompagniet (CPH:HUSCO) and its trend of ROCE, we really liked what we saw.

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 HusCompagniet, this is the formula:

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

0.14 = kr.355m ÷ (kr.3.6b - kr.1.0b) (Based on the trailing twelve months to June 2022).

So, HusCompagniet has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Consumer Durables industry average of 11% it's much better.

View our latest analysis for HusCompagniet

roce
CPSE:HUSCO Return on Capital Employed September 29th 2022

Above you can see how the current ROCE for HusCompagniet 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 HusCompagniet here for free.

The Trend Of ROCE

HusCompagniet's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 58% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that HusCompagniet has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 61% over the last year, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

HusCompagniet does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is significant...

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether HusCompagniet is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About CPSE:HUSCO

HusCompagniet

HusCompagniet A/S develops single-family detached houses in Denmark.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth0
Past Performance3
Financial Health5
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet average dividend payer.