Lerøy Seafood Group (OB:LSG) Might Be Having Difficulty Using Its Capital Effectively

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Lerøy Seafood Group (OB:LSG), we don't think it's current trends fit the mold of a multi-bagger.

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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. Analysts use this formula to calculate it for Lerøy Seafood Group:

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

0.05 = kr1.6b ÷ (kr40b - kr8.4b) (Based on the trailing twelve months to September 2025).

So, Lerøy Seafood Group has an ROCE of 5.0%. In absolute terms, that's a low return but it's around the Food industry average of 5.6%.

View our latest analysis for Lerøy Seafood Group

Above you can see how the current ROCE for Lerøy Seafood Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Lerøy Seafood Group .

How Are Returns Trending?

When we looked at the ROCE trend at Lerøy Seafood Group, we didn't gain much confidence. To be more specific, ROCE has fallen from 8.8% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

What We Can Learn From Lerøy Seafood Group's ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Lerøy Seafood Group is reinvesting for growth and has higher sales as a result. These trends are starting to be recognized by investors since the stock has delivered a 8.2% gain to shareholders who've held over the last five years. So this stock may still be an appealing investment opportunity, if other fundamentals prove to be sound.

One more thing to note, we've identified 1 warning sign with Lerøy Seafood Group and understanding this should be part of your investment process.

While Lerøy Seafood Group 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.