Why You Should Care About Friedrich Vorwerk Group's (ETR:VH2) Strong Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Friedrich Vorwerk Group (ETR:VH2) looks attractive right now, so lets see what the trend of returns can tell us.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Friedrich Vorwerk Group, this is the formula:

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

0.30 = €102m ÷ (€466m - €124m) (Based on the trailing twelve months to September 2025).

Thus, Friedrich Vorwerk Group has an ROCE of 30%. That's a fantastic return and not only that, it outpaces the average of 7.6% earned by companies in a similar industry.

See our latest analysis for Friedrich Vorwerk Group

Above you can see how the current ROCE for Friedrich Vorwerk Group 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 Friedrich Vorwerk Group .

What The Trend Of ROCE Can Tell Us

In terms of Friedrich Vorwerk Group's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 30% and the business has deployed 247% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

On a side note, Friedrich Vorwerk Group has done well to reduce current liabilities to 27% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Bottom Line

In summary, we're delighted to see that Friedrich Vorwerk Group has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. On top of that, the stock has rewarded shareholders with a remarkable 302% return to those who've held over the last three years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you'd like to know about the risks facing Friedrich Vorwerk Group, we've discovered 1 warning sign that you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.