Investors Met With Slowing Returns on Capital At Koninklijke Ahold Delhaize (AMS:AD)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Koninklijke Ahold Delhaize (AMS:AD), we don't think it's current trends fit the mold of a multi-bagger.

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Return On Capital Employed (ROCE): What Is It?

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 Koninklijke Ahold Delhaize:

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

0.12 = €3.7b ÷ (€49b - €17b) (Based on the trailing twelve months to September 2025).

Therefore, Koninklijke Ahold Delhaize has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Consumer Retailing industry average of 11%.

Check out our latest analysis for Koninklijke Ahold Delhaize

Above you can see how the current ROCE for Koninklijke Ahold Delhaize 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 Koninklijke Ahold Delhaize .

So How Is Koninklijke Ahold Delhaize's ROCE Trending?

Things have been pretty stable at Koninklijke Ahold Delhaize, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at Koninklijke Ahold Delhaize in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger. This probably explains why Koninklijke Ahold Delhaize is paying out 47% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

What We Can Learn From Koninklijke Ahold Delhaize's ROCE

We can conclude that in regards to Koninklijke Ahold Delhaize's returns on capital employed and the trends, there isn't much change to report on. Since the stock has gained an impressive 76% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Koninklijke Ahold Delhaize does have some risks though, and we've spotted 3 warning signs for Koninklijke Ahold Delhaize that you might be interested in.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.