Is Alumexx N.V.’s (AMS:ALX) 13% ROE a Cause for Celebration or Caution?

Alumexx N.V. (AMS:ALX) has captured investor attention with a Return on Equity (ROE) of 14.05% in 2025, a figure that appears to outpace many peers in the capital goods sector. However, beneath this seemingly robust metric lies a complex interplay of high leverage and earnings volatility that demands closer scrutiny. The question is not merely whether the ROE is impressive, but whether it is sustainable in the face of structural financial risks.

The Debt-Driven ROE: A Double-Edged Sword

Alumexx’s ROE is amplified by aggressive financial leverage. The company’s debt-to-equity ratio of 5.38x [1]—a level that dwarfs industry norms—suggests that its equity base is dwarfed by borrowed capital. This leverage magnifies returns in good times but exposes the company to significant risks during downturns. For context, a debt-to-equity ratio above 1 is often seen as a red flag, and Alumexx’s figure is more than five times that threshold.

The interest coverage ratio of 1.3x [1] further underscores the precariousness of this structure. With EBIT of €2.6 million barely covering interest payments, any decline in earnings—whether from a slowdown in demand or rising borrowing costs—could trigger a liquidity crisis. This is particularly concerning given the company’s cash-to-debt ratio of 0.01 [2], which indicates that Alumexx lacks sufficient liquidity to service its obligations without relying on external financing or operational cash flow.

Earnings Volatility: A Hidden Vulnerability

While Alumexx’s earnings have surged by 197.2% year-over-year [1], this growth is partly attributable to a one-time gain of €364,000 [4]. Such non-recurring items can distort ROE metrics, creating a false sense of stability. The company’s net profit margin of 1.64% [5]—already thin—leaves little room for error in a volatile market.

Earnings volatility is further compounded by the company’s exposure to cyclical demand in the building industry. Though Alumexx’s five-year earnings growth of 35.3% [3] outpaces the sector average of 4% [4], this growth trajectory is not guaranteed to continue. A slowdown in construction activity or a spike in raw material costs could erode margins, testing the durability of the ROE.

The Beta Paradox: Stock Stability vs. Earnings Uncertainty

Alumexx’s stock beta of 0.61 [5] suggests lower price volatility compared to the market, which might lull investors into complacency. However, beta measures price movement, not earnings stability. The company’s financials reveal a different story: a 12.9% revenue growth rate [2] and a 35.3% earnings growth rate [3] mask underlying fragility. For instance, the cash-to-debt ratio has declined to one of its lowest levels in a decade [2], signaling a deteriorating liquidity position.

A Call for Prudence

Alumexx’s ROE is a product of high leverage and aggressive growth, but these factors also amplify its vulnerability. The company’s ability to sustain this ROE hinges on two critical questions: Can it maintain its earnings momentum in a potential economic slowdown? And can it refinance or reduce its debt burden without triggering a liquidity crunch?

Conclusion

Alumexx’s 13% ROE is a cause for cautious optimism, not unbridled celebration. The company’s financial structure is a house of cards built on thin margins, high debt, and volatile earnings. While its growth trajectory is impressive, investors must weigh the risks of a potential correction. For now, the ROE appears to be a product of leverage rather than operational efficiency—a distinction that could prove critical in the years ahead.

**Source:[1] Alumexx (AMS:ALX) Statistics & Valuation Metrics
https://stockanalysis.com/quote/ams/ALX/statistics/[2] Alumexx NV (XAMS:ALX) Cash-to-Debt
https://www.gurufocus.com/term/cash-to-debt/XAMS:ALX[3] Alumexx (ENXTAM:ALX) - Earnings & Revenue Performance
https://simplywall.st/stocks/nl/capital-goods/ams-alx/alumexx-shares/past[4] Alumexx (AMS:ALX) Revenue
https://stockanalysis.com/quote/ams/ALX/revenue/[5] Alumexx (AMS:ALX) Statistics & Valuation Metrics
https://stockanalysis.com/quote/ams/ALX/statistics/