Borussia Dortmund's ROCE Deterioration Signals Weakening Long-Term Growth Potential

Borussia Dortmund, one of Europe's most storied football clubs, has long been a symbol of on-pitch dominance and financial resilience. However, beneath its glittering Champions League campaigns and roaring fanbase lies a troubling reality: its Return on Capital Employed (ROCE) has been steadily deteriorating, while capital employed growth remains stagnant. This combination of weakening returns and a maturing capital base raises serious questions about the club's ability to sustain long-term shareholder value.

The ROCE Crisis: A Decline in Operational Efficiency

ROCE, a key metric measuring profitability relative to capital employed, has been a rollercoaster for Borussia Dortmund over the past five years. After hitting a peak of 14.17% in 2021—a rebound from its pandemic-era nadir of -21.85% in 2020—the metric has since oscillated, dropping to 6.17% in 2022, 8.44% in 2023, and then spiking back to 14.17% in 2024. However, the most recent quarterly data paints a grim picture: as of March 2025, the annualized ROCE had slumped to 6.65%, a stark decline from its 2024 high.

This volatility isn't merely statistical noise. A declining ROCE suggests Borussia Dortmund is struggling to generate consistent profits from its capital investments. While the 2024 spike coincided with record revenue from a Champions League final run, the subsequent drop in 2025—amid falling net income—highlights an overreliance on one-off tournament earnings. Without sustainable revenue streams or operational cost discipline, the club's ROCE appears structurally weak.

Stagnant Capital Employed: No Room to Grow

Capital employed—a proxy for the total funds deployed in operations—has shown little meaningful growth over the same period. Despite an increase in enterprise value (equity plus net debt) from €1.68 billion in 2021 to €2.1 billion by 2023, Borussia Dortmund's capital base has failed to expand at a pace that justifies its valuation.

• Net Debt Reduction: While net debt fell from €76.2 million in 2021 to €22.8 million in 2024, this improvement was largely due to cost-cutting rather than strategic reinvestment.
• Equity Growth Stalls: Equity rose from €232.6 million in 2021 to €3.1 billion by 2024, but this reflects asset revaluations rather than operational cash generation.

The lack of organic capital growth is alarming. A stagnating capital base limits the club's ability to invest in player development, infrastructure, or new revenue streams. With wage costs hitting a record €269 million in 2024—far outpacing revenue growth—the club is caught in a high-cost, low-return cycle.

Financial Health: Revenue Peaks and Margin Pressures

Borussia Dortmund's revenue hit a record €555 million in 2024, driven by Champions League earnings and broadcasting deals. However, 2025 projections are bleak: revenue is expected to dip to €500 million, while net income could plummet by 39.78% to €26.68 million. This decline reflects unsustainable reliance on tournament revenue and rising operational costs.

• Commercial Revenue Plateau: Despite new sponsorships (e.g., Vodafone), commercial income growth has slowed, with margins compressed by rising player wages.
• Ticketing Constraints: Post-pandemic recovery in matchday revenue has been uneven, failing to recoup pre-2020 levels.

The numbers tell a clear story: Borussia Dortmund is operating in a high-cost, low-margin environment with no clear path to scaling its capital base. This traps it in a “mature” phase where incremental growth is elusive.

Investment Implications: Time to Reassess

For shareholders, the deteriorating ROCE and stagnant capital employed are red flags. The stock (ETR:BVB) trades at a premium valuation, but its fundamentals no longer justify this optimism. Key risks include:

1. Overvaluation: Enterprise value of €2.1 billion assumes sustained Champions League success—a risky bet given competition.
2. Profit Volatility: Net income swings from €44.3 million in 2024 to €26.7 million in 2025 highlight operational instability.
3. Wage Inflation: Rising player costs threaten margins unless revenue grows sustainably.

Investment Advice: Holders of BVB stock should consider exiting unless the club demonstrates:
- A clear strategy to diversify revenue (e.g., digital ventures, global fan engagement).
- Meaningful ROCE improvements through cost discipline or new capital investments.
- A plan to reduce reliance on Champions League windfalls.

Until then, Borussia Dortmund's financial trajectory suggests it is a “value trap”—a stock masquerading as an opportunity but offering little growth. Investors seeking exposure to football's financial markets would be better served by clubs like Manchester United or Bayern Munich, which have stronger ROCE trends and capital efficiency.

Conclusion: The Roar Is Fading

Borussia Dortmund's legacy as a football powerhouse is unassailable, but its financial health is now in doubt. A deteriorating ROCE, stagnant capital employed, and reliance on volatile tournament earnings paint a picture of a club at a crossroads. Without transformative changes, the “Yellow Wall” may soon crumble under the weight of its own financial fragility. For investors, patience is a luxury they can no longer afford.