Here's What To Make Of Lagercrantz Group's (STO:LAGR B) Decelerating Rates Of Return

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Lagercrantz Group (STO:LAGR B) looks decent, right now, so lets see what the trend of returns can tell us.

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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. The formula for this calculation on Lagercrantz Group is:

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

0.16 = kr1.5b ÷ (kr12b - kr2.8b) (Based on the trailing twelve months to June 2025).

Thus, Lagercrantz Group has an ROCE of 16%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Electronic industry average of 14%.

Check out our latest analysis for Lagercrantz Group

Above you can see how the current ROCE for Lagercrantz Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Lagercrantz Group for free.

What Can We Tell From Lagercrantz Group's ROCE Trend?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 16% and the business has deployed 224% more capital into its operations. Since 16% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From Lagercrantz Group's ROCE

The main thing to remember is that Lagercrantz Group has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 298% return over the last five years, so long term investors are no doubt ecstatic with that result. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

If you want to continue researching Lagercrantz Group, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Lagercrantz Group 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.