Eezy Oyj (HEL:EEZY) Will Be Looking To Turn Around Its Returns

What underlying fundamental trends can indicate that a company might be in decline? More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. This indicates the company is producing less profit from its investments and its total assets are decreasing. In light of that, from a first glance at Eezy Oyj (HEL:EEZY), we've spotted some signs that it could be struggling, so let's investigate.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Eezy Oyj, this is the formula:

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

0.02 = €3.2m ÷ (€195m - €35m) (Based on the trailing twelve months to December 2024).

Thus, Eezy Oyj has an ROCE of 2.0%. Ultimately, that's a low return and it under-performs the Professional Services industry average of 9.0%.

See our latest analysis for Eezy Oyj

Above you can see how the current ROCE for Eezy Oyj 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 Eezy Oyj for free.

The Trend Of ROCE

We are a bit worried about the trend of returns on capital at Eezy Oyj. About five years ago, returns on capital were 6.5%, however they're now substantially lower than that as we saw above. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Eezy Oyj to turn into a multi-bagger.

What We Can Learn From Eezy Oyj's ROCE

All in all, the lower returns from the same amount of capital employed aren't exactly signs of a compounding machine. Unsurprisingly then, the stock has dived 77% over the last five years, so investors are recognizing these changes and don't like the company's prospects. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.

One final note, you should learn about the 3 warning signs we've spotted with Eezy Oyj (including 1 which makes us a bit uncomfortable) .

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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.