WEBULL

H & M Hennes & Mauritz (STO:HM B) Is Experiencing Growth In Returns On Capital

Simply Wall St · 3d ago

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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at H & M Hennes & Mauritz (STO:HM B) so let's look a bit deeper.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Analysts use this formula to calculate it for H & M Hennes & Mauritz:

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

0.17 = kr17b ÷ (kr172b - kr71b) (Based on the trailing twelve months to August 2025).

So, H & M Hennes & Mauritz has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 10% generated by the Specialty Retail industry.

Check out our latest analysis for H & M Hennes & Mauritz

roce
OM:HM B Return on Capital Employed January 8th 2026

In the above chart we have measured H & M Hennes & Mauritz's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for H & M Hennes & Mauritz .

What Can We Tell From H & M Hennes & Mauritz's ROCE Trend?

You'd find it hard not to be impressed with the ROCE trend at H & M Hennes & Mauritz. The data shows that returns on capital have increased by 365% over the trailing five years. The company is now earning kr0.2 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 20% less capital than it was five years ago. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 42% of its operations, which isn't ideal. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

The Bottom Line On H & M Hennes & Mauritz's ROCE

In the end, H & M Hennes & Mauritz has proven it's capital allocation skills are good with those higher returns from less amount of capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 32% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Like most companies, H & M Hennes & Mauritz does come with some risks, and we've found 1 warning sign that you should be aware of.

While H & M Hennes & Mauritz 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.