Under The Bonnet, FM Mattsson Mora Group's (STO:FMM B) Returns Look Impressive

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at FM Mattsson Mora Group's (STO:FMM B) look very promising so lets take a look.

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. The formula for this calculation on FM Mattsson Mora Group is:

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

0.27 = kr325m ÷ (kr1.8b - kr556m) (Based on the trailing twelve months to June 2022).

Therefore, FM Mattsson Mora Group has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Building industry average of 14%.

See our latest analysis for FM Mattsson Mora Group

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 FM Mattsson Mora Group's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

FM Mattsson Mora Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 27%. Basically the business is earning more per dollar of capital invested and in addition to that, 79% more capital is being employed now too. So we're very much inspired by what we're seeing at FM Mattsson Mora Group thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that FM Mattsson Mora Group is reaping the rewards from prior investments and is growing its capital base. And a remarkable 117% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, FM Mattsson Mora Group does come with some risks, and we've found 1 warning sign that you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.