Hugo Boss (ETR:BOSS) Is Looking To Continue Growing Its Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Hugo Boss (ETR:BOSS) so let's look a bit deeper.

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What Is 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. The formula for this calculation on Hugo Boss is:

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

0.12 = €363m ÷ (€3.5b - €502m) (Based on the trailing twelve months to September 2025).

So, Hugo Boss has an ROCE of 12%. That's a pretty standard return and it's in line with the industry average of 12%.

See our latest analysis for Hugo Boss

In the above chart we have measured Hugo Boss' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Hugo Boss .

What Does the ROCE Trend For Hugo Boss Tell Us?

We like the trends that we're seeing from Hugo Boss. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. The amount of capital employed has increased too, by 71%. So we're very much inspired by what we're seeing at Hugo Boss thanks to its ability to profitably reinvest capital.

One more thing to note, Hugo Boss has decreased current liabilities to 14% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that Hugo Boss has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

What We Can Learn From Hugo Boss' ROCE

All in all, it's terrific to see that Hugo Boss is reaping the rewards from prior investments and is growing its capital base. And with a respectable 50% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

Hugo Boss does have some risks though, and we've spotted 1 warning sign for Hugo Boss 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.

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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.