The Return Trends At SSAB (STO:SSAB A) Look Promising

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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, we've noticed some promising trends at SSAB (STO:SSAB A) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for SSAB:

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

0.075 = kr6.0b ÷ (kr104b - kr24b) (Based on the trailing twelve months to June 2025).

So, SSAB has an ROCE of 7.5%. In absolute terms, that's a low return but it's around the Metals and Mining industry average of 7.6%.

View our latest analysis for SSAB

In the above chart we have measured SSAB'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 SSAB for free.

How Are Returns Trending?

We're delighted to see that SSAB is reaping rewards from its investments and has now broken into profitability. The company now earns 7.5% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by SSAB has remained flat over the period. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

In Conclusion...

To bring it all together, SSAB has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 209% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

If you'd like to know about the risks facing SSAB, we've discovered 2 warning signs that you should be aware of.

While SSAB 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.