Graphic Packaging Holding (NYSE:GPK) Shareholders Will Want The ROCE Trajectory To Continue

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Graphic Packaging Holding (NYSE:GPK) so let's look a bit deeper.

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

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 Graphic Packaging Holding is:

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

0.11 = US$1.1b ÷ (US$11b - US$1.6b) (Based on the trailing twelve months to March 2025).

Thus, Graphic Packaging Holding has an ROCE of 11%. That's a relatively normal return on capital, and it's around the 9.8% generated by the Packaging industry.

View our latest analysis for Graphic Packaging Holding

In the above chart we have measured Graphic Packaging Holding's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Graphic Packaging Holding for free.

What The Trend Of ROCE Can Tell Us

Graphic Packaging Holding is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 55% more capital is being employed now too. So we're very much inspired by what we're seeing at Graphic Packaging Holding thanks to its ability to profitably reinvest capital.

Our Take On Graphic Packaging Holding's ROCE

To sum it up, Graphic Packaging Holding has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 76% 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. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One final note, you should learn about the 2 warning signs we've spotted with Graphic Packaging Holding (including 1 which is a bit concerning) .

While Graphic Packaging Holding isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.