We Like These Underlying Return On Capital Trends At Hapag-Lloyd (ETR:HLAG)

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. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Hapag-Lloyd (ETR:HLAG) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Hapag-Lloyd:

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

0.10 = €2.6b ÷ (€33b - €7.0b) (Based on the trailing twelve months to March 2025).

Therefore, Hapag-Lloyd has an ROCE of 10%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Shipping industry average of 9.4%.

View our latest analysis for Hapag-Lloyd

Above you can see how the current ROCE for Hapag-Lloyd 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 Hapag-Lloyd for free.

The Trend Of ROCE

Investors would be pleased with what's happening at Hapag-Lloyd. Over the last five years, returns on capital employed have risen substantially 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 106%. So we're very much inspired by what we're seeing at Hapag-Lloyd thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, Hapag-Lloyd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 277% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Hapag-Lloyd does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those can't be ignored...

While Hapag-Lloyd 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.