We Think Eolus Aktiebolag (STO:EOLU B) Might Have The DNA Of A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Eolus Aktiebolag (STO:EOLU B) looks great, so lets see what the trend can tell us.

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Understanding 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. To calculate this metric for Eolus Aktiebolag, this is the formula:

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

0.20 = kr467m ÷ (kr2.8b - kr549m) (Based on the trailing twelve months to June 2025).

So, Eolus Aktiebolag has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Construction industry average of 10%.

See our latest analysis for Eolus Aktiebolag

In the above chart we have measured Eolus Aktiebolag'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 Eolus Aktiebolag for free.

So How Is Eolus Aktiebolag's ROCE Trending?

Eolus Aktiebolag is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 20%. Basically the business is earning more per dollar of capital invested and in addition to that, 92% more capital is being employed now too. So we're very much inspired by what we're seeing at Eolus Aktiebolag thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 19%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Bottom Line On Eolus Aktiebolag's ROCE

All in all, it's terrific to see that Eolus Aktiebolag is reaping the rewards from prior investments and is growing its capital base. And since the stock has dived 80% over the last five years, there may be other factors affecting the company's prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

One more thing: We've identified 5 warning signs with Eolus Aktiebolag (at least 2 which make us uncomfortable) , and understanding them would certainly be useful.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.