Returns On Capital At Alleima (STO:ALLEI) Have Hit The Brakes

Simply Wall St · 4d ago

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Having said that, from a first glance at Alleima (STO:ALLEI) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Alleima is:

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

0.098 = kr1.8b ÷ (kr24b - kr4.7b) (Based on the trailing twelve months to March 2025).

So, Alleima has an ROCE of 9.8%. Even though it's in line with the industry average of 9.8%, it's still a low return by itself.

See our latest analysis for Alleima

roce
OM:ALLEI Return on Capital Employed June 10th 2025

Above you can see how the current ROCE for Alleima 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 analyst report for Alleima .

What Can We Tell From Alleima's ROCE Trend?

There are better returns on capital out there than what we're seeing at Alleima. The company has consistently earned 9.8% for the last five years, and the capital employed within the business has risen 65% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 20% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

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The Bottom Line On Alleima's ROCE

In summary, Alleima has simply been reinvesting capital and generating the same low rate of return as before. Although the market must be expecting these trends to improve because the stock has gained 18% over the last year. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

While Alleima doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for ALLEI on our platform.

While Alleima isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.