RevolutionRace

In one line: A 27%-return, net-cash, 70%-gross-margin business at 14.5× EBIT that has not grown profit in three years.

Direct-to-consumer outdoor apparel, SEK 6.6bn, selling into about 40 countries with 73% of sales outside the Nordics. On the surface it is the cheapest name that cleared every gate in the original screen: 27.4% ROIC, a 69.8% gross margin, net cash of SEK 177m, 14.5× EV/EBIT and a 5.3% free cash flow yield.

The problem is only visible on a longer view:

Every krona of growth was handed back in margin. That is why incremental return on capital is negative, and it is structurally the same pattern that disqualifies a serial acquirer buying revenue that dilutes the mix.

There is a fair mitigation. The FY22 margin was a pandemic-era direct-to-consumer peak that was never sustainable. Management targets 20%, nine-month FY26 came in at 21.4%, and trailing margin is 20.3% — so profitability has settled exactly where the company said it would.

Growth, though, has decelerated hard: from 15% in local currency early in the year to broadly flat reported revenue in the January–March quarter. The krona strengthened materially over that period and most sales are foreign, so local-currency growth is better than the reported line — but nowhere near the 20% ambition. Add consumer discretionary exposure, direct-to-consumer return rates, competition from both legacy brands and low-cost entrants, and overseas manufacturing. The shares also sit about 30% above their 200-week average, so there is no valuation support from the trend either.

What would change the verdict: one clean quarter of re-accelerating local-currency growth with the margin held above 20%.