Indutrade

In one line: Spent roughly SEK 8.2bn on acquisitions over four years and grew operating profit by SEK 148m.

Indutrade was initially set aside for the wrong reason — it missed a 15% return on capital threshold, and the usual defence of a serial acquirer is that goodwill from past deals sits in the denominator and understates the operating businesses. On tangible capital it earns 32.5%, which sounds like a rescue.

It is not, because that adjustment rescues every acquirer indiscriminately. It excludes the acquisitions, which are the capital allocation decision. The cash paid for a business is capital employed, and netting it out removes the only question that matters.

The honest test is the return on capital actually deployed:

Revenue up 19%, operating profit up 4%, and roughly SEK 8.2bn of acquisition spending in between. Incremental return on deployed capital works out at 2.4%. The margin has fallen in every single year, including the trailing period — this is the textbook serial-acquirer failure of buying revenue that dilutes the mix.

For fairness: 2022 was a post-pandemic peak for industrial distribution, so the base year flatters the decline. But a monotonic fall through to the most recent trailing figures points at something structural rather than a base effect.

There is a neat irony. Of the five large Swedish acquirers examined, Indutrade is the only one sitting exactly on its 200-week average — the one that looks cheapest on the chart is the one whose economics have actually deteriorated. By contrast, Addtech and Lagercrantz both post incremental returns above their headline returns, which is what a working compounder looks like. Both are priced accordingly, at 31× and 27× EBIT.