The Return Trends At Finnair Oyj (HEL:FIA1S) Look Promising

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Finnair Oyj (HEL:FIA1S) so let's look a bit deeper.

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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. To calculate this metric for Finnair Oyj, this is the formula:

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

0.011 = €23m ÷ (€3.5b - €1.4b) (Based on the trailing twelve months to September 2025).

Thus, Finnair Oyj has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Airlines industry average of 10%.

See our latest analysis for Finnair Oyj

Above you can see how the current ROCE for Finnair Oyj compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Finnair Oyj .

What Can We Tell From Finnair Oyj's ROCE Trend?

It's great to see that Finnair Oyj has started to generate some pre-tax earnings from prior investments. While the business is profitable now, it used to be incurring losses on invested capital five years ago. In regards to capital employed, Finnair Oyj is using 30% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. Finnair Oyj could be selling under-performing assets since the ROCE is improving.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 41% of its operations, which isn't ideal. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

The Bottom Line On Finnair Oyj's ROCE

In the end, Finnair Oyj has proven it's capital allocation skills are good with those higher returns from less amount of capital. Astute investors may have an opportunity here because the stock has declined 69% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

While Finnair Oyj looks impressive, no company is worth an infinite price. The intrinsic value infographic for FIA1S helps visualize whether it is currently trading for a fair price.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.