Cooper-Standard Holdings' (NYSE:CPS) Returns On Capital Are Heading Higher

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Cooper-Standard Holdings (NYSE:CPS) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

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 Cooper-Standard Holdings is:

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

0.091 = US$106m ÷ (US$1.8b - US$637m) (Based on the trailing twelve months to March 2025).

So, Cooper-Standard Holdings has an ROCE of 9.1%. On its own, that's a low figure but it's around the 11% average generated by the Auto Components industry.

See our latest analysis for Cooper-Standard Holdings

Above you can see how the current ROCE for Cooper-Standard Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Cooper-Standard Holdings for free.

How Are Returns Trending?

Like most people, we're pleased that Cooper-Standard Holdings is now generating some pretax earnings. The company was generating losses five years ago, but now it's turned around, earning 9.1% which is no doubt a relief for some early shareholders. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 35%. This could potentially mean that the company is selling some of its assets.

Our Take On Cooper-Standard Holdings' ROCE

In the end, Cooper-Standard Holdings has proven it's capital allocation skills are good with those higher returns from less amount of capital. And a remarkable 123% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Cooper-Standard Holdings we've found 2 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

While Cooper-Standard Holdings 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.