Hermès International Société en commandite par actions (EPA:RMS) Knows How To Allocate Capital Effectively

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. 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. And in light of that, the trends we're seeing at Hermès International Société en commandite par actions' (EPA:RMS) look very promising so lets take a look.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Hermès International Société en commandite par actions is:

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

0.35 = €6.5b ÷ (€22b - €3.2b) (Based on the trailing twelve months to June 2025).

Thus, Hermès International Société en commandite par actions has an ROCE of 35%. That's a fantastic return and not only that, it outpaces the average of 7.7% earned by companies in a similar industry.

See our latest analysis for Hermès International Société en commandite par actions

Above you can see how the current ROCE for Hermès International Société en commandite par actions 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 Hermès International Société en commandite par actions .

How Are Returns Trending?

The trends we've noticed at Hermès International Société en commandite par actions are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 35%. The amount of capital employed has increased too, by 132%. So we're very much inspired by what we're seeing at Hermès International Société en commandite par actions thanks to its ability to profitably reinvest capital.

Our Take On Hermès International Société en commandite par actions' ROCE

All in all, it's terrific to see that Hermès International Société en commandite par actions is reaping the rewards from prior investments and is growing its capital base. And a remarkable 209% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for RMS on our platform that is definitely worth checking out.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.