Lindab International (STO:LIAB) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Lindab International's (STO:LIAB) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

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 Lindab International is:

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

0.13 = kr1.4b ÷ (kr13b - kr2.5b) (Based on the trailing twelve months to December 2022).

So, Lindab International has an ROCE of 13%. That's a pretty standard return and it's in line with the industry average of 13%.

Check out our latest analysis for Lindab International

Above you can see how the current ROCE for Lindab International 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 report on analyst forecasts for the company.

SWOT Analysis for Lindab International

What Can We Tell From Lindab International's ROCE Trend?

We like the trends that we're seeing from Lindab International. Over the last five years, returns on capital employed have risen substantially to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 78% more capital is being employed now too. So we're very much inspired by what we're seeing at Lindab International thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that Lindab International is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 144% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Lindab International can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Lindab International, we've discovered 1 warning sign that you should be aware of.

While Lindab International 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.