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Meliá Hotels International (BME:MEL) Is Looking To Continue Growing Its Returns On Capital

Simply Wall St · 3d ago

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Meliá Hotels International's (BME:MEL) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Meliá Hotels International is:

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

0.077 = €299m ÷ (€4.7b - €810m) (Based on the trailing twelve months to September 2025).

So, Meliá Hotels International has an ROCE of 7.7%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 18%.

Check out our latest analysis for Meliá Hotels International

roce
BME:MEL Return on Capital Employed January 6th 2026

Above you can see how the current ROCE for Meliá Hotels International 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 Meliá Hotels International .

What Does the ROCE Trend For Meliá Hotels International Tell Us?

Meliá Hotels International has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 7.7% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Meliá Hotels International has remained flat over the period. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

Our Take On Meliá Hotels International's ROCE

As discussed above, Meliá Hotels International appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the stock has returned a solid 51% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Meliá Hotels International does have some risks though, and we've spotted 1 warning sign for Meliá Hotels International that you might be interested in.

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.