If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in HELLA GmbH KGaA's (ETR:HLE) returns on capital, so let's have a look.
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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 HELLA GmbH KGaA is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.065 = €300m ÷ (€7.3b - €2.6b) (Based on the trailing twelve months to June 2025).
Therefore, HELLA GmbH KGaA has an ROCE of 6.5%. Ultimately, that's a low return and it under-performs the Auto Components industry average of 9.2%.
In the above chart we have measured HELLA GmbH 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 HELLA GmbH KGaA.
HELLA GmbH KGaA is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 124% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.
To bring it all together, HELLA GmbH KGaA has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 114% 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.