Returns On Capital At Kingfisher (LON:KGF) Have Stalled

There are a few key trends to look for if we want to identify the next multi-bagger. 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. However, after briefly looking over the numbers, we don't think Kingfisher (LON:KGF) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

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. The formula for this calculation on Kingfisher is:

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

0.078 = UK£675m ÷ (UK£12b - UK£3.0b) (Based on the trailing twelve months to July 2025).

Thus, Kingfisher has an ROCE of 7.8%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 13%.

View our latest analysis for Kingfisher

Above you can see how the current ROCE for Kingfisher compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Kingfisher .

How Are Returns Trending?

Things have been pretty stable at Kingfisher, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Kingfisher doesn't end up being a multi-bagger in a few years time. This probably explains why Kingfisher is paying out 44% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

The Bottom Line On Kingfisher's ROCE

We can conclude that in regards to Kingfisher's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 33% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Like most companies, Kingfisher does come with some risks, and we've found 3 warning signs that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.