KSB SE KGaA (ETR:KSB) Shareholders Will Want The ROCE Trajectory To Continue

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in KSB SE KGaA's (ETR:KSB) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for KSB SE KGaA:

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

0.13 = €242m ÷ (€2.8b - €945m) (Based on the trailing twelve months to June 2025).

Thus, KSB SE KGaA has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 9.1% it's much better.

Check out our latest analysis for KSB SE KGaA

Above you can see how the current ROCE for KSB SE KGaA compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for KSB SE KGaA .

What Can We Tell From KSB SE KGaA's ROCE Trend?

The trends we've noticed at KSB SE KGaA are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 26% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that KSB SE KGaA is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 302% 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 KSB SE KGaA can keep these trends up, it could have a bright future ahead.

KSB SE KGaA does have some risks though, and we've spotted 1 warning sign for KSB SE KGaA that you might be interested in.

While KSB SE KGaA 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.