Returns Are Gaining Momentum At Sláturfélags Suðurlands svf (ICE:SFS B)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Sláturfélags Suðurlands svf (ICE:SFS B) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Sláturfélags Suðurlands svf:

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

0.11 = Kr1.2b ÷ (Kr14b - Kr3.0b) (Based on the trailing twelve months to June 2024).

So, Sláturfélags Suðurlands svf has an ROCE of 11%. That's a pretty standard return and it's in line with the industry average of 11%.

See our latest analysis for Sláturfélags Suðurlands svf

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Sláturfélags Suðurlands svf's past further, check out this free graph covering Sláturfélags Suðurlands svf's past earnings, revenue and cash flow.

How Are Returns Trending?

Sláturfélags Suðurlands svf is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 11%. The amount of capital employed has increased too, by 34%. So we're very much inspired by what we're seeing at Sláturfélags Suðurlands svf thanks to its ability to profitably reinvest capital.

Our Take On Sláturfélags Suðurlands svf's ROCE

To sum it up, Sláturfélags Suðurlands svf has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 134% to shareholders over the last three years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Sláturfélags Suðurlands svf does have some risks, we noticed 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

While Sláturfélags Suðurlands svf isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.