Returns At Mercedes-Benz Group (ETR:MBG) Are On The Way Up

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Mercedes-Benz Group (ETR:MBG) looks quite promising in regards to its trends of return on capital.

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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. To calculate this metric for Mercedes-Benz Group, this is the formula:

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

0.06 = €11b ÷ (€261b - €75b) (Based on the trailing twelve months to March 2025).

Therefore, Mercedes-Benz Group has an ROCE of 6.0%. Ultimately, that's a low return and it under-performs the Auto industry average of 9.6%.

View our latest analysis for Mercedes-Benz Group

In the above chart we have measured Mercedes-Benz Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Mercedes-Benz Group .

What Can We Tell From Mercedes-Benz Group's ROCE Trend?

Mercedes-Benz Group has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 962% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Mercedes-Benz Group's ROCE

In summary, we're delighted to see that Mercedes-Benz Group has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 114% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Mercedes-Benz Group can keep these trends up, it could have a bright future ahead.

One final note, you should learn about the 2 warning signs we've spotted with Mercedes-Benz Group (including 1 which can't be ignored) .

While Mercedes-Benz Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.