WEBULL

The Returns At Volvo Car AB (publ.) (STO:VOLCAR B) Aren't Growing

Simply Wall St · 4d ago

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Volvo Car AB (publ.) (STO:VOLCAR B), it didn't seem to tick all of these boxes.

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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 Volvo Car AB (publ.):

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

0.069 = kr15b ÷ (kr375b - kr153b) (Based on the trailing twelve months to September 2025).

Therefore, Volvo Car AB (publ.) has an ROCE of 6.9%. On its own that's a low return, but compared to the average of 5.4% generated by the Auto industry, it's much better.

Check out our latest analysis for Volvo Car AB (publ.)

roce
OM:VOLCAR B Return on Capital Employed January 6th 2026

Above you can see how the current ROCE for Volvo Car AB (publ.) 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 Volvo Car AB (publ.) .

What The Trend Of ROCE Can Tell Us

The returns on capital haven't changed much for Volvo Car AB (publ.) in recent years. Over the past five years, ROCE has remained relatively flat at around 6.9% and the business has deployed 71% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

On a side note, Volvo Car AB (publ.)'s current liabilities are still rather high at 41% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line

Long story short, while Volvo Car AB (publ.) has been reinvesting its capital, the returns that it's generating haven't increased. And investors appear hesitant that the trends will pick up because the stock has fallen 37% in the last three years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a final note, we found 3 warning signs for Volvo Car AB (publ.) (1 can't be ignored) you should be aware of.

While Volvo Car AB (publ.) 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.