Latest news with #Severfield
Yahoo
3 days ago
- Business
- Yahoo
Returns On Capital Are Showing Encouraging Signs At Severfield (LON:SFR)
If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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 Severfield (LON:SFR) so let's look a bit deeper. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Severfield: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.12 = UK£32m ÷ (UK£388m - UK£133m) (Based on the trailing twelve months to September 2024). Therefore, Severfield has an ROCE of 12%. In absolute terms, that's a pretty standard return but compared to the Construction industry average it falls behind. See our latest analysis for Severfield In the above chart we have measured Severfield's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Severfield . The trends we've noticed at Severfield are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 12%. 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 25%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers. On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. The current liabilities has increased to 34% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase. In summary, it's great to see that Severfield 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. Astute investors may have an opportunity here because the stock has declined 34% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation. One final note, you should learn about the 4 warning signs we've spotted with Severfield (including 2 which shouldn't be ignored) . While Severfield 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. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
Yahoo
03-05-2025
- Business
- Yahoo
Are these 3 heavily-discounted UK shares worth considering to buy in May?
UK shares in the FTSE 100 have been making a rapid recovery in recent weeks since the early April market sell-off. But not all British stocks have been holding up so well. There's quite a wide range of London-listed companies now trading near their 52-week low at valuations which, on the surface, are starting to look dirt cheap. For example, three that have caught my attention this month are Videndum (LSE:VID), Severfield (LSE:SFR), and Ultimate Products (LSE:ULTP). In terms of business models, all three of these UK shares are quite different from each other. Videndum specialises in hardware and software solutions for content creators, Severfield's focused on creating structural steelworks, while Ultimate Products sells a branded portfolio of homeware products. However, one common characteristic all these companies currently share is that their stock prices are in the gutter. And as a result, the forward price-to-earnings ratios are now looking quite attractive from a value investor perspective. So are these buying opportunities or value traps? Company 12-Month Share Price Performance Forward Price-to-Earnings Ratio Videndum -74% 9.3 Severfield -66% 2.2 Ultimate Products -64% 5.1 Before jumping headfirst into a new value investment, it's important to understand what's driving the stock price down. Looking at these enterprises, there are a few factors at play. However, the primary catalyst for each appears to be: A slower-than-expected rebound in the scripted TV markets following last year's strikes has caused Videndum's revenue to underperform, translating into profit warnings for shareholders Disruption within the construction industry has caused a number of Severfield's key projects to be delayed or outright cancelled, with seemingly no sign of improvement on the horizon A combination of weaker UK consumer spending paired with retailer inventory destocking headwinds has caused demand for Ultimate Product's offer to suffer while shipping costs continue to rise There seems to be a common theme here. All three businesses are experiencing a cyclical downturn of some sort. But buying during a downcycle can potentially be lucrative if the firms are able to bounce back. Not all of these UK shares, even at their seemingly cheap valuations today, are tempting me to buy right now. Severfield's the cheapest, according to the forward earnings multiple. But these projected earnings for 2026 include profits for projects that should have materialised in 2025. And with construction headwinds looking unlikely to turn any time soon, the group's downward journey might not yet be over. Videndum seems to be in a better spot, cyclically speaking, as the film & TV industry's recovering at a faster pace compared to the construction sector. Butthe co mpany's also tackling debt and liquidity issues that management's in the process of renegotiating. As for Ultimate Products, the firm appears to offer a stronger financial offer with operational cash flow more than able to cover interest expenses and dividends to shareholders. Operating in a highly competitive industry does give me pause. However, its leading brands, such as Russell Hobbs, Salter, and Dreamtime, definitely give it a competitive edge. With that in mind, value investors looking for cheap UK shares today might want to investigate Ultimate Products a bit more deeply. The post Are these 3 heavily-discounted UK shares worth considering to buy in May? appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Sign in to access your portfolio
