Investors Will Want HELLA GmbH KGaA's (ETR:HLE) Growth In ROCE To Persist

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at HELLA GmbH KGaA (ETR:HLE) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on HELLA GmbH KGaA is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.065 = €300m ÷ (€7.3b - €2.6b) (Based on the trailing twelve months to June 2025).

Therefore, HELLA GmbH KGaA has an ROCE of 6.5%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 9.2%.

View our latest analysis for HELLA GmbH KGaA

Above you can see how the current ROCE for HELLA GmbH KGaA compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering HELLA GmbH KGaA for free.

What Can We Tell From HELLA GmbH KGaA's ROCE Trend?

HELLA GmbH KGaA is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 124% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On HELLA GmbH KGaA's ROCE

To sum it up, HELLA GmbH KGaA is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 100% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching HELLA GmbH KGaA, you might be interested to know about the 2 warning signs that our analysis has discovered.

While HELLA GmbH KGaA isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.