Beijer Alma (STO: BEIA B) returns hit a wall


What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will display two trends; first growth to recover on capital employed (ROCE) and on the other hand, an increase amount capital employed. This shows us that it is a composing machine, capable of continually reinvesting its profits in the business and generating higher returns. Therefore, when we briefly examined Beijer Alma’s (STO: BEIA B) Trend ROCE, we were pretty happy with what we saw.

What is Return on Employee Capital (ROCE)?

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. To calculate this metric for Beijer Alma, here is the formula:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.19 = kr817m ÷ (kr6.1b – kr1.8b) (Based on the last twelve months up to September 2021).

Therefore, Beijer Alma has a ROCE of 19%. This is a relatively normal return on capital, and it is around the 18% generated by the machinery industry.

See our latest review for Beijer Alma

OM: BEIA B Review of Employee Capital November 29, 2021

Above you can see how Beijer Alma’s current ROCE compares to his previous returns on capital, but there isn’t much you can say about the past. If you like, you can view analyst forecasts covering Beijer Alma here for free.

So what’s the Beijer Alma ROCE trend?

While the returns on capital are good, they haven’t budged much. Over the past five years, ROCE has remained relatively stable at around 19% and the company has deployed 81% additional capital in its operations. Given that 19% is moderate ROCE, it’s good to see that a company can keep reinvesting at these decent rates of return. Stable returns in this basic stage can be unattractive, but if they can be sustained over the long term, they often offer nice rewards for shareholders.

The key to take away

In short, Beijer Alma simply reinvested capital regularly, at these decent rates of return. On top of that, the stock rewarded shareholders with a remarkable 155% return for those who have held it in the past five years. So while the positive underlying trends can be explained by investors, we still believe this stock is worth looking into.

Beijer Alma does involve certain risks, however, and we have identified 2 warning signs for Beijer Alma that might interest you.

While Beijer Alma doesn’t get the highest return, check out this free list of companies that generate high returns on equity with strong balance sheets.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.

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