DuPont ROE Sweden: Quality Beats OMX by 3.42% Per Year (2000-2025)

Sweden is a positive surprise. Quality ROE on STO returned 5.82% annually from 2000 to 2025, beating the OMX Stockholm 30 at 2.40% by +3.42% per year. That's meaningful outperformance from a 21-stock portfolio.

Contents

1. Method
2. What is DuPont Analysis?
3. The Screen
4. What We Found
5. Quality beats the OMX. Leverage wins inside the quality universe.
6. Why leverage dominates in Sweden
7. Thin universe, strong win rate
8. Backtest Methodology
9. Limitations
10. Takeaway
11. Part of a Series
12. References

The margin-to-leverage split tells a different story. Leverage-driven ROE at 8.76% dominated margin-driven at 1.96%, a -6.8% spread. Leveraged Swedish industrials and real estate companies drove much of the STO's return. The quality filter, by constraining leverage, pushed the portfolio toward companies that underperformed those sectors.

The key takeaway: Quality ROE beats the OMX, but it does so despite being on the wrong side of the margin vs leverage split.

Data: FMP financial data warehouse, 2000–2025. Updated April 2026.

Method

DuPont components were computed from raw annual financial statements. The screening SQL uses TTM data for live analysis, but the backtest uses fiscal year data with a 45-day filing lag.

What is DuPont Analysis?

ROE measures profit per dollar of equity. Two companies with identical 20% ROE can have entirely different risk profiles underneath.

DuPont breaks ROE into three components:

ROE = Net Profit Margin x Asset Turnover x Equity Multiplier

• Net Profit Margin (Net Income / Revenue): Profitability per unit of revenue.
• Asset Turnover (Revenue / Total Assets): How efficiently assets generate sales.
• Equity Multiplier (Total Assets / Shareholders' Equity): Leverage. Higher means more debt-funded assets.

Sweden's corporate economy is dominated by large conglomerates (Investor AB, Industrivarden), engineering exporters (Atlas Copco, SKF, Sandvik), and real estate companies. The Wallenberg sphere and similar family-controlled conglomerates use leverage productively across long investment cycles. That structural feature explains why leverage-driven ROE outperformed in this market.

The Screen

-- DuPont ROE Quality Screen: Sweden (STO)
-- Margin-driven quality: high ROE from profitability, not leverage

SELECT
    k.symbol,
    p.companyName,
    p.sector,
    k.returnOnEquityTTM * 100 AS roe_pct,
    f.netProfitMarginTTM * 100 AS net_margin_pct,
    f.assetTurnoverTTM,
    (1 + f.debtToEquityRatioTTM) AS equity_multiplier,
    p.marketCap / 1e9 AS market_cap_b_sek
FROM key_metrics_ttm k
JOIN financial_ratios_ttm f ON k.symbol = f.symbol
JOIN profile p ON k.symbol = p.symbol
WHERE p.exchange = 'STO'
  AND k.returnOnEquityTTM > 0.15
  AND (1 + f.debtToEquityRatioTTM) < 3.0
  AND f.netProfitMarginTTM > 0.08
  AND p.marketCap > 5000000000
  AND p.sector NOT IN ('Financial Services', 'Utilities')
  AND p.isActivelyTrading = true
  AND p.isFund = false
  AND p.isEtf = false
  AND p.isActivelyTrading = true
QUALIFY ROW_NUMBER() OVER (PARTITION BY p.companyName
                           ORDER BY p.averageVolume DESC) = 1
ORDER BY f.netProfitMarginTTM DESC
LIMIT 30

The screen surfaces companies like Hexagon, Evolution, and selected engineering exporters. Swedish companies that pass both ROE > 15% and low-leverage filters tend to be in software, specialized equipment, and healthcare. The screen explicitly skews away from the family-controlled conglomerates that use leverage as a core strategy.

What We Found

Quality beats the OMX. Leverage wins inside the quality universe.

The OMX Stockholm 30 returned just 2.40% annually over 25 years. That's a modest absolute benchmark. Both All ROE > 15% (6.72%) and Quality ROE (5.82%) clear it by wide margins.

Leverage-driven ROE at 8.76% was the best performer. Swedish leveraged industrials and real estate companies benefited from two decades of declining interest rates and a strong global industrial cycle. The -6.8% margin-to-leverage spread reflects this structural tailwind.

Margin-driven ROE at 1.96% barely cleared zero in excess return terms, slightly trailing the OMX at 2.40%. The win rate for Quality ROE was 68% against the OMX, with down capture of 51.7%. The portfolio fell only half as much as the OMX in down years. That defensive characteristic partly explains the cumulative outperformance.

Why leverage dominates in Sweden

Sweden's economy runs on large, family-controlled conglomerates that deploy leverage across multi-decade investment cycles. Investor AB, controlled by the Wallenberg family, holds significant stakes in ABB, AstraZeneca, Ericsson, and Atlas Copco. These structures use leverage as a feature, not a bug.

The companies that score high on equity multiplier within the ROE > 15% screen are often subsidiaries or spin-offs of these conglomerates with access to cheap institutional capital. Their leverage is structural, long-duration, and used for genuine asset acquisition. Over 25 years and a period of declining rates, that worked.

Margin-driven Swedish stocks, by contrast, tend to be in tech, software, and niche services. Sweden has world-class software companies (Fortnox, Sinch, Tobii) but many are mid-caps with volatile profitability during the growth phase. The quality screen's margin-driven sub-portfolio didn't capture the best of Swedish tech at the right time.

Thin universe, strong win rate

The average portfolio held 21 quality stocks. That's thin, placing Sweden in the directional-only confidence tier. But the 68% win rate against the OMX over 25 years suggests the quality signal is real, even in a small universe. Down capture of 51.7% is particularly strong: the portfolio declined only half as much as the OMX when markets fell.

The Sharpe of 0.132 and max drawdown of -59.3% reflect genuine volatility. The quality filter isn't a defensive strategy in Sweden. It's an offensive one that happens to avoid the worst downturns.

Backtest Methodology

Limitations

Small universe. 21 stocks per period is below the threshold for high-confidence conclusions. Individual company outcomes can drive multi-year performance in ways that won't repeat. Treat the results as directional evidence.

Leverage sub-portfolio performance. The leverage-driven result of 8.76% is the standout number, but it reflects a specific macro environment: two decades of declining European rates and a strong industrial cycle. That tailwind won't persist indefinitely. The leverage-driven portfolio is exposed to rate normalization risk.

Sector concentration. Quality-passing Swedish stocks skew toward engineering exporters and selected tech. The portfolio's behavior often reflects those sector dynamics and global industrial demand more than the DuPont signal itself.

Family conglomerate complexity. The Wallenberg sphere and similar structures mean that Swedish "leverage-driven" companies often have access to capital on terms that aren't available to independent companies. The DuPont classification captures the reported leverage correctly, but the economic interpretation differs. Leverage at a Wallenberg subsidiary is structurally different from leverage at a standalone industrial company.

Currency effects. Returns are in SEK. The SEK/USD exchange rate moved significantly over 25 years. International investors faced currency volatility on top of equity returns.

Takeaway

Sweden delivers a clear positive result for quality investing against the local benchmark. Quality ROE at 5.82% beats the OMX Stockholm 30 at 2.40% by +3.42% annually. The 68% win rate and 51.7% down capture over 25 years are strong consistency metrics for a 21-stock portfolio.

The margin vs leverage split favors leverage in Sweden (-6.8% spread), driven by the Wallenberg-style conglomerate model. The quality filter's constraint on leverage means you're not capturing the best leverage-driven returns. But you're still outperforming a market that itself only returned 2.40% annually.

For Sweden-focused investors: the ROE quality filter works against the local benchmark. The margin-driven sub-portfolio (1.96%) is weak, but the combined quality filter delivers real alpha. The leverage-driven portfolio (8.76%) is the more aggressive bet, consistent with owning Swedish conglomerate infrastructure companies through an extended low-rate cycle.

Part of a Series

This analysis is part of our DuPont ROE global exchange comparison: - DuPont ROE on US Stocks -- full methodology - DuPont ROE on German Stocks -- +1.77% excess vs DAX - DuPont ROE: Global Comparison -- all 13 exchanges

References

• Soliman, M.T. (2008). "The Use of DuPont Analysis by Market Participants." The Accounting Review, 83(3), 823-853.
• Fairfield, P.M. and Yohn, T.L. (2001). "Using Asset Turnover and Profit Margin to Forecast Changes in Profitability." Review of Accounting Studies, 6(4), 371-385.
• Henrekson, M. and Jakobsson, U. (2012). "The Swedish Corporate Control Model: Convergence, Persistence or Decline?" Corporate Governance: An International Review, 20(2), 212-227.

Data: Ceta Research (FMP financial data warehouse), 2000-2025. Annual April rebalance, equal weight, 0.1-0.5% transaction costs (size-tiered). Past performance is not indicative of future results.

Past performance does not guarantee future results. This is educational content, not investment advice.