If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Knorr-Bremse (ETR:KBX) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Knorr-Bremse, this is the formula:

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

0.12 = €773m ÷ (€9.7b - €3.4b) (Based on the trailing twelve months to March 2025).

Therefore, Knorr-Bremse has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 8.6% it's much better.

See our latest analysis for Knorr-Bremse

In the above chart we have measured Knorr-Bremse's 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 Knorr-Bremse .

How Are Returns Trending?

When we looked at the ROCE trend at Knorr-Bremse, we didn't gain much confidence. To be more specific, ROCE has fallen from 23% over the last five years. However it looks like Knorr-Bremse might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On Knorr-Bremse's ROCE

Bringing it all together, while we're somewhat encouraged by Knorr-Bremse's reinvestment in its own business, we're aware that returns are shrinking. And investors may be recognizing these trends since the stock has only returned a total of 3.8% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.