Stock Analysis

Byggfakta Group Nordic HoldCo's (STO:BFG) Returns On Capital Are Heading Higher

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If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Byggfakta Group Nordic HoldCo (STO:BFG) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Byggfakta Group Nordic HoldCo is:

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

0.019 = kr237m ÷ (kr14b - kr1.6b) (Based on the trailing twelve months to June 2023).

So, Byggfakta Group Nordic HoldCo has an ROCE of 1.9%. Ultimately, that's a low return and it under-performs the Software industry average of 8.4%.

Check out our latest analysis for Byggfakta Group Nordic HoldCo

OM:BFG Return on Capital Employed November 6th 2023

Above you can see how the current ROCE for Byggfakta Group Nordic HoldCo 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.

The Trend Of ROCE

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last two years, returns on capital employed have risen substantially to 1.9%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 53%. So we're very much inspired by what we're seeing at Byggfakta Group Nordic HoldCo thanks to its ability to profitably reinvest capital.

What We Can Learn From Byggfakta Group Nordic HoldCo's ROCE

In summary, it's great to see that Byggfakta Group Nordic HoldCo can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And since the stock has fallen 11% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

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

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Byggfakta Group Nordic HoldCo is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.