Sláturfélags Suðurlands svf (ICE:SFS B) Is Doing The Right Things To Multiply Its Share Price

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Sláturfélags Suðurlands svf (ICE:SFS B) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Sláturfélags Suðurlands svf is:

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

0.10 = Kr963m ÷ (Kr11b - Kr1.9b) (Based on the trailing twelve months to June 2022).

Therefore, Sláturfélags Suðurlands svf has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 8.4% generated by the Food industry.

See our latest analysis for Sláturfélags Suðurlands svf

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sláturfélags Suðurlands svf's ROCE against it's prior returns. If you'd like to look at how Sláturfélags Suðurlands svf has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Investors would be pleased with what's happening at Sláturfélags Suðurlands svf. The data shows that returns on capital have increased substantially over the last five years to 10%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 29%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Sláturfélags Suðurlands svf's ROCE

In summary, it's great to see that Sláturfélags Suðurlands svf can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a solid 65% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Sláturfélags Suðurlands svf can keep these trends up, it could have a bright future ahead.

One more thing: We've identified 5 warning signs with Sláturfélags Suðurlands svf (at least 3 which are potentially serious) , and understanding these would certainly be useful.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.