CP Capital (NSE:CPCAP) Is Doing The Right Things To Multiply Its Share Price

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 CP Capital (NSE:CPCAP) and its trend of ROCE, we really liked what we saw.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on CP Capital is:

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

0.10 = ₹555m ÷ (₹6.2b - ₹696m) (Based on the trailing twelve months to March 2025).

Thus, CP Capital has an ROCE of 10.0%. Even though it's in line with the industry average of 10.0%, it's still a low return by itself.

View our latest analysis for CP Capital

Historical performance is a great place to start when researching a stock so above you can see the gauge for CP Capital's ROCE against it's prior returns. If you're interested in investigating CP Capital's past further, check out this free graph covering CP Capital's past earnings, revenue and cash flow.

So How Is CP Capital's ROCE Trending?

CP Capital's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 23% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

As discussed above, CP Capital appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 6.6% to shareholders. So with that in mind, we think the stock deserves further research.

If you want to continue researching CP Capital, you might be interested to know about the 2 warning signs that our analysis has discovered.

While CP Capital may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.