Nynomic's ROCE: A Red Flag for Investors?

Ladies and gentlemen, let me tell you something: Nynomic (ETR:M7U) is in trouble. The company's returns on capital employed (ROCE) have been on a downward spiral, and it's a red flag that investors can't afford to ignore. Let's dive into the numbers and see why this stock might be a sinking ship.

First things first, Nynomic's ROCE has plummeted from 16% to 12% over the past five years. That's a significant drop, folks! And it's not just a blip on the radar. The company has been pouring money into capital investments, but sales haven't budged. It's like throwing money down a black hole—you're not getting anything back in return.



Now, let's talk about earnings growth. Nynomic's earnings have been all over the place. Sure, they grew by 56.3% over the past year, but analysts are forecasting a decline of 8.2% per year for the next three years. That's not the kind of growth story you want to be part of, folks. It's like riding a roller coaster—exciting for a moment, but ultimately leaving you feeling queasy.

And let's not forget about the stock performance. Nynomic's stock has returned a measly 4.3% over the past five years. That's barely keeping up with inflation, folks! Investors are clearly not happy with the company's performance, and it shows in the stock price.

So, what does all this mean for Nynomic's future? Well, it's not looking good. The company's reinvestment strategy might pay off in the long run, but right now, it's a gamble. And with earnings forecast to decline and sales stagnant, it's a gamble that might not be worth taking.

But here's the thing, folks: Nynomic is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is €32.52, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. But be warned: Nynomic’s beta is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

So, what's the bottom line? Nynomic is a risky play right now. The company's declining ROCE, volatile earnings growth, and poor stock performance are all red flags that investors should be aware of. But if you're feeling brave and think you can stomach the volatility, there might be a buying opportunity here. Just don't say I didn't warn you, folks!