Investors Could Be Concerned With Duell Oyj's (HEL:DUELL) Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Having said that, from a first glance at Duell Oyj (HEL:DUELL) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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

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 Duell Oyj, this is the formula:

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

0.024 = €1.9m ÷ (€96m - €20m) (Based on the trailing twelve months to November 2024).

So, Duell Oyj has an ROCE of 2.4%. Ultimately, that's a low return and it under-performs the Retail Distributors industry average of 10%.

Check out 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'd like, you can check out the forecasts from the analysts covering Duell Oyj for free.

So How Is Duell Oyj's ROCE Trending?

The trend of ROCE doesn't look fantastic because it's fallen from 13% five years ago, while the business's capital employed increased by 152%. 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. It's unlikely that all of the funds raised have been put to work yet, so as a consequence Duell Oyj might not have received a full period of earnings contribution from it.

The Bottom Line On Duell Oyj's ROCE

Bringing it all together, while we're somewhat encouraged by Duell Oyj's reinvestment in its own business, we're aware that returns are shrinking. Moreover, since the stock has crumbled 100% over the last three years, 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.

If you want to continue researching Duell Oyj, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Duell Oyj may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.