Capital Allocation Trends At Duell Oyj (HEL:DUELL) Aren't Ideal

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Duell Oyj (HEL:DUELL) and its ROCE trend, we weren't exactly thrilled.

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. To calculate this metric for Duell Oyj, this is the formula:

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

0.011 = €843k ÷ (€94m - €17m) (Based on the trailing twelve months to August 2024).

Thus, Duell Oyj has an ROCE of 1.1%. In absolute terms, that's a low return and it also under-performs the Retail Distributors industry average of 11%.

View our latest analysis for Duell Oyj

In the above chart we have measured Duell Oyj'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 Duell Oyj .

How Are Returns Trending?

Unfortunately, the trend isn't great with ROCE falling from 13% five years ago, while capital employed has grown 158%. Usually this isn't ideal, but given Duell Oyj conducted a capital raising before their most recent earnings announcement, that would've likely contributed, at least partially, to the increased capital employed figure. The funds raised likely haven't been put to work yet so it's worth watching what happens in the future with Duell Oyj's earnings and if they change as a result from the capital raise.

The Bottom Line On Duell Oyj's ROCE

To conclude, we've found that Duell Oyj is reinvesting in the business, but returns have been falling. Moreover, since the stock has crumbled 92% over the last year, it appears investors are expecting the worst. Therefore based on the analysis done in this article, we don't think Duell Oyj has the makings of a multi-bagger.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Duell Oyj (of which 1 shouldn't be ignored!) that you should know about.

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.

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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.