LONDON–(BUSINESS WIRE)–

FORM 8.3

DISCLOSURE OF OPEN POSITION TO THE PUBLIC / DISCLOSURE OF OPERATIONS BY

A PERSON HOLDING AN INTEREST IN RELEVANT SECURITIES REPRESENTING 1% OR MORE

Rule 8.3 of the Takeover Code (the “Code”)

1. KEY INFORMATION

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If there are positions or subscription rights to be disclosed in more than one class of relevant securities of the offeror or recipient named in 1(c), copy table 2(a) or (b) (depending on the case) for each additional category of relevant securities. Security.

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All interests and short positions must be disclosed.

Details of all open equity-settled derivative positions (including traded options) or agreements to buy or sell the relevant securities must be provided on Supplementary Form 8 (Open Positions).

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Where there have been transactions in more than one class of relevant securities of the originator or recipient named in 1(c), copy table 3(a), (b), (c) or (d) ) (as applicable) for each class of relevant securities traded.

The currency of all prices and other monetary amounts must be stated.

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The Code can be viewed on the Panel’s website at www.thetakeoverpanel.org.uk.

There is a lot to unpack in this question. The short answer is, pretty good.

The major stock indices are, as I say, still reeling, with the strong-growing Eurostoxx and Nasdaq both down 15% year-to-date. The global high yield market is down nearly 6.3% year-to-date in sterling terms. Digging deeper, the US market is down 4.8%, while European high yield is down 5.8%. Given the proximity of the conflict and Europe’s dependence on Russian raw materials, this difference is not surprising.

Indeed, the US high yield market remains far more concerned about rising interest rates and duration risk than overall demand in the economy and the potential for increased defaults. An illustration of this point is the continued outperformance of low-quality CCC bonds. High yield market commentators have argued for months, if not years, that CCC bonds are a good place to hide from rising interest rates. The high coupons on offer are naturally more resilient to rising interest rates than the lower coupons you typically get from, for example, BB-rated bonds.

Of course, with commodity prices exploding, the large cohort of commodity sector bonds in the CCC-rated US portion of the market are benefiting. With fixed and limited bond upside, especially when the market has already largely priced in their current good fortune, we don’t think this is a theme that bond investors should embrace too easily. We should always keep in mind the default bias towards the lower quality segments of the market, illustrated in Chart 1 below. If an investor wants to bet on thematic and cyclical companies, it is best to do so in the stock market.

There is no such outperformance of CCCs in Europe, where the specter of stagflation is arguably greater. Stagflation is when you have both inflation and a declining economy. Inflation was already proving desperately persistent before the commodity price boom and will, of course, be exacerbated if commodity prices remain high. Meanwhile, European manufacturing and discretionary consumer spending will likely both be hit. The inflation part of this problem means that central bankers will be reluctant to reduce monetary policy as they normally do in a downturn.

To a large extent, these fears carry over to European high yield spreads, the risk premium we are paid for the risk of default that accompanies high yield bonds. The European high yield spread – as shown in Chart 2 – has now risen to 4.8%, well above the long-term average of 4.1%, and we see this as an attractive risk offset. .

Note that US high yield spreads are still below the long-term average, but with the number of interest rate hikes embedded in US government bonds, the overall return is in line with the long-term average. Therefore, we also like the US high yield, especially considering the likely resilience of the US in the face of a continued escalation in Ukraine. In our view, there is much less risk of a default spike in the US.

Our high yield exposure is currently split evenly between the US and Europe (including the UK). We have low exposure to cyclical stocks and companies with high energy production costs. We don’t have any airlines, which are so exposed to fuel costs. The quality bias we have in our process means that we are very light on CCC risk and have no noticeable risk in emerging markets. Additionally, our quality bias means we also look for companies with pricing power and resilience, two operational qualities that are the best defense in tougher economic times. With these features, our high yield holdings have an average gross redemption yield of approximately 6.7%.

Some may counter that if you’re optimistic about defaults, as we are, why not own more CCC and increase your yield? The main reason we are generally optimistic about defaults is that a small proportion of global high yield debt is due in the short term: 7% in 2022 and 16% in 2022 and 2023 combined, as shown in the Chart 3. Although, if you’re old enough, you’ll remember that the high yield market closed to new issues for 18 months during the global financial crisis! To be clear, we don’t believe this event will cause such a level of tension in the market. Looking at Chart 1, we still believe that a quality bias is the best way to approach the high yield market over the long term.

Many customers ask about liquidity. The honest answer is that in times like this, liquidity is more difficult when trying to access an offer. Often the selling price is lower than what is shown on our Bloomberg screens (and therefore factored into market prices). We often see more liquid large corporate bonds indicating greater volatility than parts of the market with, in our view, higher risk of default.

During longer periods of market stress, this price dynamic tends to play out and the lower quality and less liquid segments of the market catch up in terms of market price. Our “big, liquid, listed” mantra means that we expect to be less affected than many during such times.

The corollary is that longer periods of market stress create opportunities for valuation, as the compensation for future defaults – the spread – often overreacts. We don’t think this time is any different.

For a full list of common financial words and terms, see our glossary here.

Main risks

Past performance is no guarantee of future performance. The value of an investment and the income from it can go down as well as up and is not guaranteed. You may get back less than you originally invested. The issue of units/shares of Liontrust Funds may be subject to entry charges, which will have an impact on the realizable value of the investment, particularly in the short term. Investments should always be considered long term. Investments in funds managed by the Global Fixed Income team involve foreign currencies and may be subject to fluctuations in value due to fluctuations in exchange rates. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the interest rate. Bond markets may be subject to reduced liquidity. The Sub-Funds may invest in emerging markets/weak currencies which may have the effect of increasing volatility. Certain Funds may invest in derivatives. The use of derivatives may create leverage or leverage. A relatively small movement in the value of the underlying investment of a derivative instrument may have a greater impact, positive or negative, on the value of a fund than if the underlying investment were held instead. .

Warning

This is a commercial communication. Before making an investment, you should read the relevant Prospectus and Key Investor Information Document (KIID), which provide full details of the product, including investment costs and risks. These documents can be obtained free of charge at www.liontrust.eu or directly from Liontrust. Always research your own investments. If you are not a professional investor, please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as investment advice in any product or security mentioned, an offer to buy or sell units/shares of the Funds mentioned, or a solicitation to buy securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The promoted investment relates to the units of a fund, and not directly to the underlying assets. It contains information and analyzes believed to be accurate at the time of publication, but subject to change without notice. Although care has been taken in compiling the contents of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including to external sources (which may have been used) which have not been verified. It shall not be copied, transmitted, reproduced, disclosed or otherwise distributed in any form by fax, e-mail, oral or otherwise, in whole or in part without the express prior written consent of Liontrust. Always research your own investments and if you are not a professional investor, please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

Friday, March 11, 2022, 1:19 PM

Did you know that there are financial metrics that can provide clues to a potential multi-bagger? Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. This shows us that it is a compounding machine, capable of continuously reinvesting its profits back into the business and generating higher returns. In light of this, when we looked Baikowski (EPA:ALBKK) and its ROCE trend, we weren’t exactly thrilled.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. Analysts use this formula to calculate it for Baikowski:

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

0.094 = €4.6m ÷ (€67m – €18m) (Based on the last twelve months to June 2021).

Thereby, Baikowski has a ROCE of 9.4%. In absolute terms, this is a low yield, but it is far better than the chemical industry average of 7.8%.

See our latest analysis for Baikowski

Although the past is not indicative of the future, it can be useful to know the historical performance of a company, which is why we have this graph above. If you want to see how Baikowski has performed in the past in other metrics, you can see this free chart of past profits, revenue and cash flow.

So what is Baikowski’s ROCE trend?

When we looked at the ROCE trend at Baikowski, we didn’t gain much confidence. Over the past four years, capital returns have declined to 9.4% from 13% four years ago. However, it looks like Baikowski could reinvest for long-term growth because while capital employed has increased, the company’s sales haven’t changed much over the past 12 months. It’s worth keeping an eye on the company’s earnings going forward to see if those investments end up contributing to the bottom line.

The essential

In summary, Baikowski is reinvesting funds into the business for growth, but unfortunately, it appears sales haven’t grown much yet. Considering the stock has gained an impressive 29% over the past three years, investors must be thinking there are better things to come. But if the trajectory of these underlying trends continues, we think the likelihood of it being a multi-bagger from here is not high.

One last note, you should inquire about the 3 warning signs we spotted some with Baikowski (including 1 which is a bit unpleasant).

For those who like to invest in solid companies, look at this free list of companies with strong balance sheets and high returns on equity.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

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

BRANFORD, Conn., March 03, 2022 (GLOBE NEWSWIRE) — Sachem Capital Corp. (NYSE American: SACH) Announces the Pricing of a Registered Public Offering of $50.0 Million Aggregate Principal Amount of 6.00% Unsecured and Unsubordinated Notes Due Five Years from the Date issue (“Notes”). The net proceeds of the offering to Sachem Capital Corp. is expected to be approximately $48.2 million after payment of underwriting discounts and commissions and estimated offering costs payable by Sachem Capital Corp.

The offering is expected to close on March 9, 2022, subject to customary closing conditions. Sachem Capital Corp. granted the underwriters a 30-day option to purchase up to an additional aggregate principal amount of $7.5 million of notes to cover over-allotments, if any.

Notes will be graded past bet with all unsecured and unsubordinated debt of the company, whether currently outstanding or issued in the future. The Notes are expected to list on the NYSE American under the symbol “SCCE” and begin trading on or about March 10, 2022.

The Notes will mature on March 30, 2027 and may be redeemed, in whole or in part, at any time or from time to time, at the Company’s option beginning on March 9, 2024. Interest on the Notes will accrue at the rate annual rate of 6.00% and will be payable quarterly, in arrears, on March 30, June 30, September 30 and December 30 during which the Notes are outstanding, commencing on June 30, 2022.

The Notes have a private credit rating of BBB+ assigned by Egan-Jones Ratings Company, an independent, unaffiliated rating agency. Egan-Jones is a nationally recognized statistical rating organization and is recognized by the National Association of Insurance Commissioners as a credit rating provider. Egan-Jones is also certified by the European Securities and Markets Authority. A security rating is not a recommendation to buy, sell or hold any security and may be subject to revision or withdrawal at any time.

Ladenburg Thalmann & Co. Inc., Janney Montgomery Scott LLC, InspereX LLC and William Blair & Company, LLC are acting as joint bookrunners for the offering. Colliers Securities LLC is acting as co-manager of the offering.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the securities of this offer or any other securities, nor will there be any sale of the Notes or any other securities. mentioned in this press release in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

A registration statement relating to, among other things, the Notes has been filed with and declared effective by the Securities and Exchange Commission. The offering is being made only by means of a related prospectus supplement and an accompanying base prospectus forming part of the effective registration statement, copies of which may be obtained, when available, from from: Ladenburg Thalmann & Co. Inc. upon written request to Syndicate Department, 640 5th Avenue, 4th Floor, New York, NY 10019 (telephone number 1-800-573-2541) or by sending e-mail to prospectus @ladenburg.com; Janney Montgomery Scott LLC, by written request to 1717 Arch Street Philadelphia, PA 19103 (phone number 1-800-526-6397) or by emailing prospectus@janney.com; or InspereX LLC, Attn: Syndicate Department, 200 S. Wacker Drive, Suite 3400, Chicago, IL 60606 (phone number 1-800-327-1546) or by emailing prospectus_requests@insperex.com; or William Blair & Company, LLC upon written request to 150 North Riverside Plaza, Chicago, Illinois 60606 (phone number 1-800-621-0687) or by emailing prospectus@williamblair.com. Copies may also be obtained free of charge by visiting EDGAR on the SEC’s website at http://www.sec.gov.

Sachem Capital Corp. has filed a preliminary prospectus supplement, dated March 3, 2022, with the Securities and Exchange Commission which contains a more detailed description of the Notes and the terms of the offering. The preliminary prospectus supplement, dated March 3, 2022, and the accompanying base prospectus, dated February 25, 2022, which contain other important information about Sachem Capital Corp., should be read carefully before investing in the tickets. Investors are urged to carefully consider their personal investment objectives, the risks relating to Sachem Capital Corp., generally, and the Notes in particular, and other matters relating to Sachem Capital Corp., its business, operations and its financial situation, before investing in the notes.

About Sachem Capital Corp.

Sachem Capital Corp. specializes in the origination, underwriting, financing, servicing and management of a portfolio of first mortgage loans. It offers short-term (i.e. three years or less) secured non-bank loans (sometimes referred to as “hard money” loans) to property investors to finance the acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut. . The company does not lend to owner occupiers. The company’s primary underwriting criteria is a conservative loan-to-value ratio. The properties securing the Company’s loans are generally classified as residential or commercial real estate and are generally held for the purpose of resale or investment. Each loan is secured by a first ranking mortgage on real estate. Each loan is also personally guaranteed by the principal(s) of the borrower, which security may be secured as security by a pledge of the guarantor’s interest in the borrower. The company also makes opportunistic real estate purchases outside of its lending business. The company believes that it qualifies as a real estate investment trust (REIT) for federal income tax purposes and has elected to be taxed as a REIT beginning with its 2017 tax year.

Forward-looking statements

This press release may contain forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding our future operating results and financial condition, our strategy and plans, and our expectations for future operations, are statements prospective. The words “anticipate”, “estimate”, “expect”, “project”, “plan”, “seek”, “intend”, “believe”, “may”, “might”, ” will”, “should”, “could”, “likely”, “continue”, “design” and the negative form of these terms and other similar words and phrases are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections regarding future events and trends that we believe may affect our financial condition, results of operations, strategy, operations and business objectives in the near and future. long term and our financial needs. These forward-looking statements are subject to several risks, uncertainties and assumptions, as described in our 2020 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on March 31, 2021. Due to these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this press release may not occur, and actual results may differ materially and adversely from those anticipated or implied by the forward-looking statements.

You should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Further, neither we nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. We disclaim any obligation to update any of these forward-looking statements.

All forward-looking statements attributable to us are expressly qualified in their entirety by these and other cautionary statements made in this press release. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.

Investor and media contact:
Crescendo Communications, LLC
Email: sach@crescendo-ir.com
Tel: (212) 671-1021

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. However, after investigating Clas Ohlson (STO:CLAS B), we don’t think current trends fit the mold of a multi-bagger.

Understanding return on capital employed (ROCE)

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. Analysts use this formula to calculate it for Clas Ohlson:

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

0.17 = 622 million kr ÷ (6.4 billion kr – 2.7 billion kr) (Based on the last twelve months to October 2021).

Thereby, Clas Ohlson has a ROCE of 17%. By itself, that’s a standard return, but it’s far better than the 12% generated by the specialty retail industry.

See our latest analysis for Clas Ohlson

In the chart above, we measured Clas Ohlson’s past ROCE against his past performance, but the future is arguably more important. If you want to see what analysts are predicting for the future, you should check out our free report for Clas Ohlson.

What does Clas Ohlson’s ROCE trend tell us?

In terms of Clas Ohlson’s historic ROCE moves, the trend isn’t fantastic. About five years ago the return on capital was 28%, but since then it has fallen to 17%. Meanwhile, the company is using more capital, but that hasn’t changed much in terms of sales over the past 12 months, so that could reflect longer-term investments. It may take some time before the company begins to see a change in the income from these investments.

Furthermore, Clas Ohlson’s current liabilities are still quite high at 42% of total assets. This effectively means that suppliers (or short-term creditors) finance a large part of the business, so just be aware that this may introduce some elements of risk. Although this is not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

In summary, while we are somewhat encouraged by Clas Ohlson’s reinvestment in his own business, we are aware that returns are diminishing. And investors may recognize these trends since the stock has only returned 0.2% to shareholders in total over the past five years. So if you’re looking for a multi-bagger, we think you’d have better luck elsewhere.

One more thing we spotted 3 warning signs facing Clas Ohlson which might interest you.

Although Clas Ohlson isn’t currently generating the highest returns, we’ve compiled a list of companies that are currently generating over 25% return on equity. look at this free list here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

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

Finding a business that has the potential to grow significantly isn’t easy, but it is possible if we look at a few key financial metrics. Typically, we will want to notice a growth trend to return to on capital employed (ROCE) and at the same time, a based capital employed. Ultimately, this demonstrates that this is a company that reinvests its earnings at increasing rates of return. However, after investigating Atlas Technical Consultants (NASDAQ:ATCX), we don’t think current trends fit the mold of a multi-bagger.

What is return on capital employed (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. The formula for this calculation on Atlas Technical Consultants is:

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

0.045 = $16 million ÷ ($420 million – $66 million) (Based on the last twelve months to October 2021).

Thereby, Atlas Technical Consultants has a ROCE of 4.5%. Ultimately, that’s a poor performer, and it’s below the professional services industry average of 11%.

See our latest analysis for Atlas Technical Consultants

In the chart above, we measured Atlas Technical Consultants’ past ROCE against its past performance, but the future is arguably more important. If you wish, you can view forecasts from analysts covering Atlas Technical Consultants here for free.

What does the ROCE trend tell us for Atlas Technical Consultants?

At first glance, the ROCE trend at Atlas Technical Consultants does not inspire confidence. Over the past three years, capital returns have declined to 4.5% from 6.1% three years ago. However, given that capital employed and revenue have both increased, it appears that the company is currently continuing to grow, following short-term returns. If these investments prove successful, it can bode very well for long-term stock performance.

The Key Takeaway

While returns have fallen for Atlas Technical Consultants lately, we are encouraged to see that sales are increasing and the company is reinvesting in its operations. These trends are beginning to be recognized by investors as the stock has delivered a 14% gain to shareholders who have held it over the past three years. Therefore, we recommend that you take a closer look at this stock to confirm if it has the makings of a good investment.

One last note, you should inquire about the 3 warning signs we spotted with Atlas Technical Consultants (including 1 essential).

While Atlas Tech Consultants don’t generate the highest return, check out this free list of companies that achieve high returns on equity with strong balance sheets.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

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

Did you know that there are financial metrics that can provide clues of a potential multi-bagger? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. So when we looked at the ROCE trend of JB Hi-Fi (ASX:JBH) we really liked what we saw.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. To calculate this metric for JB Hi-Fi, here is the formula:

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

0.35 = AU$705 million ÷ (AU$3.8 billion – AU$1.8 billion) (Based on the last twelve months to December 2021).

So, JB Hi-Fi has a ROCE of 35%. In absolute terms, that’s an excellent return and even better than the specialty retail industry average of 20%.

See our latest review for JB Hi-Fi

In the chart above, we measured JB Hi-Fi’s past ROCE against its past performance, but the future is arguably more important. If you want to see what analysts are predicting for the future, you should check out our free report for JB Hi-Fi.

What does the ROCE trend tell us for JB Hi-Fi?

Investors would be thrilled with what’s happening at JB Hi-Fi. Data shows that capital returns have increased significantly over the past five years to 35%. The company is actually making more money per dollar of capital employed, and it’s worth noting that the amount of capital has also increased by 41%. So we’re very inspired by what we’re seeing at JB Hi-Fi with its ability to reinvest capital profitably.

On a separate but related note, it’s important to know that JB Hi-Fi has a current liabilities to total assets ratio of 48%, which we would consider quite high. This may entail certain risks, since the business is essentially dependent on its suppliers or other types of short-term creditors. Ideally, we would like this to decrease, as this would mean fewer risky bonds.

The essential

In summary, JB Hi-Fi has proven that it can reinvest in the business and generate higher returns on that capital employed, which is great. Given that the stock has returned 153% to shareholders over the past five years, it seems investors recognize these changes. That being said, we still think the promising fundamentals mean the company merits further due diligence.

Since virtually every business faces risks, it’s worth knowing about them, and we’ve spotted 2 warning signs for JB Hi-Fi (1 of which is a little worrying!) that you should know about.

If you want to find more stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

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

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. Ideally, a business will show two trends; first growth to return to on capital employed (ROCE) and on the other hand, growth quantity capital employed. Simply put, these types of businesses are slot machines, meaning they continually reinvest their profits at ever-higher rates of return. However, after briefly looking at the numbers, we don’t think American (NYSE: AEE) has the makings of a multi-bagger in the future, but let’s see why it may be.

Return on capital employed (ROCE): what is it?

For those who don’t know what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital used in its business. To calculate this metric for Ameren, here is the formula:

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

0.046 = $1.5 billion ÷ ($35 billion – $2.4 billion) (Based on the last twelve months to September 2021).

So, Ameren posted a ROCE of 4.6%. Even though it’s in line with the industry average of 4.6%, it’s still a poor performer on its own.

See our latest analysis for Ameren

In the chart above, we measured Ameren’s past ROCE against its past performance, but the future is arguably more important. If you want, you can check out analyst forecasts covering Ameren here for free.

So, what is Ameren’s ROCE trend?

In terms of Ameren’s historic ROCE moves, the trend isn’t fantastic. Over the past five years, capital returns have declined to 4.6% from 6.3% five years ago. Meanwhile, the company is using more capital, but that hasn’t changed much in terms of sales over the past 12 months, so that could reflect longer-term investments. It’s worth keeping an eye on the company’s earnings going forward to see if those investments end up contributing to the bottom line.

Our take on Ameren’s ROCE

In summary, while we are somewhat encouraged by Ameren’s reinvestment in its own business, we are aware that returns are diminishing. Considering the stock has gained an impressive 84% over the past five years, investors must be thinking there are better things to come. However, unless these underlying trends turn more positive, we wouldn’t be too hopeful.

Ameren does come with some risks though, we have found 3 warning signs in our investment analysis, and 1 of them makes us a little uncomfortable…

Although Ameren isn’t currently making the highest returns, we’ve compiled a list of companies that are currently generating more than 25% return on equity. look at this free list here.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

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

Given the apparent end of the multi-trillion dollar government stimulus known as Quantitative Tapering (QT), interest rates have started to rise.

In fact, the yield on the 10-year US Treasury rose from 1.52% at the end of last year to 1.92%, an increase of 26.32%. With this in mind, we thought it appropriate to illustrate the impact this will most likely have on your bond portfolio.

Generally speaking, bonds are negotiable securities that can be bought and sold after their date of issue and before their date of maturity. With this in mind, the first fact that any investor in these fixed income securities should realize is that the price or value of a bond will react inversely to interest rates. As interest rates rise as they have so far this year, bond values ​​decline.

Conversely, if the recent rise reverses and rates fall, bond values ​​will rise.

As an example, suppose that on December 31, 2021, you invested $100,000 in a ten-year U.S. Treasury bond (both principal and interest payment guaranteed by the full faith and credit of the U.S. government widely accepted as the safest fixed income investments in the world). As detailed above, the going rate that day was around 1.52%, which meant that that $100,000 would earn $1,520 in interest, or $760 paid semi-annually, every year for ten years. . However, since then the yield has climbed to 1.92%.

Therefore, if you buy a bond now, you will receive annual interest payments of $1,920, paid semi-annually. Following the rise in interest rates, what happened to the interest payments and the value of the 1.52% note you purchased on December 31? Very briefly, the interest payments of $760 semi-annually will remain the same for the remainder of the life of the note or until it matures. However, the principal value of the bond, if you want to sell it before its maturity, has gone down. After all, who would give you $100,000 for a bond yielding 1.52% when they could now buy their own bond yielding 1.92%?

The answer, sensible person. You’re stuck receiving $1,520 per year for the rest of the life of the note rather than the $1,920 you would receive if you had waited for interest rates to rise a bit. The loss to you is $400 per year for the remainder of the term or nearly $4,000 in total income.

You can therefore conclude that your bond or your bond fund may fall in price or in net asset value. As there has been a mostly unbroken bull market in bonds for nearly forty years, it is important to reaffirm that bond prices react inversely to interest rates. When interest rates rise, bond values ​​fall and when interest rates fall, bond values ​​rise. With interest rates still near 50-year lows, the most likely direction for interest rates is up.

What should an investor do now? Be patient. Let’s see how the economy reacts to all this quantitative tightening. Let’s see how President Biden and his administration handle Congress, the economy, tax reform, the burgeoning deficit, trade, foreign policy, and geopolitical events.

Keep in mind that two of our main principles of investing are 1) asset allocation works best over the long term and 2) investing in bonds for income and stocks for growth. Try to stick to the middle part of the yield curve or bonds that mature between four and eight years. By doing so, you will receive more than half the interest of a thirty-year bond with much less principal risk if you wish to sell your bonds before maturity.

Please note that all data is for general information purposes only and does not constitute specific recommendations. The opinions of the authors do not constitute a recommendation to buy or sell the stocks, the bond market or any security contained therein. Securities involve risk and fluctuations in principal will occur. Please research any investment thoroughly before committing any money or consult your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell securities for themselves which they also recommend to their clients. Consult your financial advisor before making any changes to your portfolio. To contact Fagan Associates, please call (518) 279-1044.