Is Fiskars Oyj Abp's (HEL:FSKRS) Stock On A Downtrend As A Result Of Its Poor Financials?

With its stock down 12% over the past three months, it is easy to disregard Fiskars Oyj Abp (HEL:FSKRS). Given that stock prices are usually driven by a company’s fundamentals over the long term, which in this case look pretty weak, we decided to study the company's key financial indicators. In this article, we decided to focus on Fiskars Oyj Abp's ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

How To Calculate Return On Equity?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Fiskars Oyj Abp is:

2.3% = €16m ÷ €692m (Based on the trailing twelve months to June 2025).

The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each €1 of shareholders' capital it has, the company made €0.02 in profit.

See our latest analysis for Fiskars Oyj Abp

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

A Side By Side comparison of Fiskars Oyj Abp's Earnings Growth And 2.3% ROE

It is hard to argue that Fiskars Oyj Abp's ROE is much good in and of itself. Not just that, even compared to the industry average of 7.6%, the company's ROE is entirely unremarkable. For this reason, Fiskars Oyj Abp's five year net income decline of 18% is not surprising given its lower ROE. However, there could also be other factors causing the earnings to decline. Such as - low earnings retention or poor allocation of capital.

However, when we compared Fiskars Oyj Abp's growth with the industry we found that while the company's earnings have been shrinking, the industry has seen an earnings growth of 1.4% in the same period. This is quite worrisome.

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. What is FSKRS worth today? The intrinsic value infographic in our free research report helps visualize whether FSKRS is currently mispriced by the market.

Is Fiskars Oyj Abp Making Efficient Use Of Its Profits?

With a three-year median payout ratio as high as 121%,Fiskars Oyj Abp's shrinking earnings don't come as a surprise as the company is paying a dividend which is beyond its means. Paying a dividend higher than reported profits is not a sustainable move. To know the 3 risks we have identified for Fiskars Oyj Abp visit our risks dashboard for free.

Moreover, Fiskars Oyj Abp has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to drop to 66% over the next three years. As a result, the expected drop in Fiskars Oyj Abp's payout ratio explains the anticipated rise in the company's future ROE to 10%, over the same period.

Conclusion

On the whole, Fiskars Oyj Abp's performance is quite a big let-down. The low ROE, combined with the fact that the company is paying out almost if not all, of its profits as dividends, has resulted in the lack or absence of growth in its earnings. That being so, the latest industry analyst forecasts show that the analysts are expecting to see a huge improvement in the company's earnings growth rate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.