Fulcrum Utility Services... Share Discussion Threads

[pictureframe] 18/5/2019 09:19

After Fridays fall P/e now just 6

Taken from



One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business. We'll use ROE to examine Fulcrum Utility Services Limited (LON:FCRM), by way of a worked example.

Over the last twelve months Fulcrum Utility Services has recorded a ROE of 19%. Another way to think of that is that for every £1 worth of equity in the company, it was able to earn £0.19.

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View our latest analysis for Fulcrum Utility Services

How Do I Calculate ROE?
The formula for ROE is:

Return on Equity = Net Profit ÷ Shareholders' Equity

Or for Fulcrum Utility Services:

19% = UK£7.8m ÷ UK£40m (Based on the trailing twelve months to September 2018.)

It's easy to understand the 'net profit' part of that equation, but 'shareholders' equity' requires further explanation. It is all earnings retained by the company, plus any capital paid in by shareholders. You can calculate shareholders' equity by subtracting the company's total liabilities from its total assets.

What Does ROE Signify?
Return on Equity measures a company's profitability against the profit it has kept for the business (plus any capital injections). The 'return' is the amount earned after tax over the last twelve months. That means that the higher the ROE, the more profitable the company is. So, all else equal, investors should like a high ROE. Clearly, then, one can use ROE to compare different companies.

Does Fulcrum Utility Services Have A Good Return On Equity?
By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. Pleasingly, Fulcrum Utility Services has a superior ROE than the average (8.3%) company in the Gas Utilities industry.


That's what I like to see. In my book, a high ROE almost always warrants a closer look. For example, I often check if insiders have been buying shares .

How Does Debt Impact Return On Equity?
Most companies need money -- from somewhere -- to grow their profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the first and second cases, the ROE will reflect this use of cash for investment in the business. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. That will make the ROE look better than if no debt was used.

Fulcrum Utility Services's Debt And Its 19% ROE
Shareholders will be pleased to learn that Fulcrum Utility Services has not one iota of net debt! Its solid ROE indicates a good business, especially when you consider it is not using leverage. After all, with cash on the balance sheet, a company has a lot more optionality in good times and bad.

But It's Just One Metric
Return on equity is one way we can compare the business quality of different companies. A company that can achieve a high return on equity without debt could be considered a high quality business. If two companies have the same ROE, then I would generally prefer the one with less debt.

[davr0s] 17/5/2019 21:23

I have no idea - I just see a share price falling

[pireric] 17/5/2019 20:26

I think there must be concerns over the quality of earnings here. Balance sheet and cash flow raises quality of earnings qs IMO with low free cash generation, high working capital

[davr0s] 17/5/2019 20:18

Yeah I sold out in the mid60s - it's just amazing how far stocks will fall despite the story

[scooper72] 17/5/2019 19:15

Glad I decided to take a loss the day before. Saved myself a few hundred quid. I guess it's now wait and see if it's going down further and working out whether it is worth buying back in.

[davr0s] 17/5/2019 17:43

What made you think that ?

[mammyoko] 17/5/2019 17:20

Somebody dumped a load today

[pictureframe] 17/5/2019 15:01

Yep pretty sure in closed period. Directors recently bought shares too

[value viper] 17/5/2019 14:58

Is co is a close period ?Can / could directors buy ?Statement from co perhaps needed !?Although often that doesn't help if intended to do so

[pictureframe] 17/5/2019 14:19

another 20k shares added to my pot

[mammyoko] 17/5/2019 11:55

Some big sales today

[pictureframe] 17/5/2019 11:35

Getting tempting to add but will wait a little longer!

[george stobbart] 17/5/2019 11:24

This should to drop fast to low 20s if labour keeps on banging on nationalisation

[pictureframe] 17/5/2019 10:21

Sitting on my hands until I add as there is no support and there might be an op to buy cheaper. On metrics this is cheap - PE of 7 , Divi 6.8% and no debt

[topvest] 15/5/2019 20:55

The energy sector is close to meltdown, due to government interference. Politicians need to stop interfering with everything. Who wants to invest in expensive assets over 20 years if the politicians change the rules every other year. Price cap, gas phase out, capacity market suspended, ROC changes, penalties, TRIADs phased out etc etc. Underlines how truly rubbish our politicians are. Constant meddling. Anyway, I think Fulcrum are reasonably well placed whatever happens, albeit no doubt its impacting the outlook at the margin. Results in a few weeks and so we will see then what things look like.

[george stobbart] 15/5/2019 14:22

Labour vandalism coming to the UK Energy transmission market

Labour are publishing plans to nationalise UK energy distribution networks tomorrow. However, a draft of the document has already been widely circulated and this is available through the link below.

hxxps://www.labour.org.uk/wp-content/uploads/2019/03/Bringing-Energy-Home-2019.pdf?

[iceman82] 14/5/2019 05:15

i bought it to early at 44 p.... regretting now

[scubadiverr] 13/5/2019 13:35

And likely to get cheaper

[pictureframe] 13/5/2019 13:21

getting cheap

[george stobbart] 09/5/2019 17:03

CFO jumped off the boat.. red flag there.

heading to 25p unfortunately

[value viper] 09/5/2019 12:33

I agree but did note no " may we thank her for her service" type comment - was to the point Hope no issue with her book keeping skills of course !

[ducatiman] 09/5/2019 12:18

The market never likes it when a financial officer departs but it's not with immediate effect.

[1gibson] 27/4/2019 13:20

Green gas reaches milestone as it supplies 1m UK homes

One million homes in Britain are now using “green gas” for heating and cooking after a surge in energy produced from farm and food waste.
Biomethane plants – there are now 60 in the UK – use food leftovers, cattle and chicken manure as well as grass silage and hybrid rye to create gas.
According to the Green Gas Certification Scheme, the number of homes supplied with green gas has leapt 13-fold since 2017. Campaigners say it could supply as many as 10m UK homes by 2050.