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Investors Shouldn't Overlook RATIONAL's (ETR:RAA) Impressive Returns On Capital

Simply Wall St · 3d ago

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. So when we looked at the ROCE trend of RATIONAL (ETR:RAA) we really liked what we saw.

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What Is 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. Analysts use this formula to calculate it for RATIONAL:

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

0.36 = €331m ÷ (€1.1b - €195m) (Based on the trailing twelve months to September 2025).

Therefore, RATIONAL has an ROCE of 36%. In absolute terms that's a great return and it's even better than the Machinery industry average of 9.0%.

Check out our latest analysis for RATIONAL

roce
XTRA:RAA Return on Capital Employed January 8th 2026

Above you can see how the current ROCE for RATIONAL 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 RATIONAL .

The Trend Of ROCE

Investors would be pleased with what's happening at RATIONAL. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 36%. The amount of capital employed has increased too, by 71%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From RATIONAL's ROCE

All in all, it's terrific to see that RATIONAL is reaping the rewards from prior investments and is growing its capital base. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know about the risks facing RATIONAL, we've discovered 1 warning sign that you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.