KWS SAAT SE KGaA (ETR:KWS) Is Looking To Continue Growing Its Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at KWS SAAT SE KGaA (ETR:KWS) so let's look a bit deeper.

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Understanding 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. Analysts use this formula to calculate it for KWS SAAT SE KGaA:

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

0.10 = €230m ÷ (€3.0b - €658m) (Based on the trailing twelve months to March 2025).

So, KWS SAAT SE KGaA has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 9.2% generated by the Food industry.

See our latest analysis for KWS SAAT SE KGaA

In the above chart we have measured KWS SAAT SE KGaA'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 KWS SAAT SE KGaA .

How Are Returns Trending?

We like the trends that we're seeing from KWS SAAT SE KGaA. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 23%. So we're very much inspired by what we're seeing at KWS SAAT SE KGaA thanks to its ability to profitably reinvest capital.

What We Can Learn From KWS SAAT SE KGaA's ROCE

All in all, it's terrific to see that KWS SAAT SE KGaA is reaping the rewards from prior investments and is growing its capital base. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

While KWS SAAT SE KGaA looks impressive, no company is worth an infinite price. The intrinsic value infographic for KWS helps visualize whether it is currently trading for a fair price.

While KWS SAAT 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.