The Trend Of High Returns At CPI Card Group (NASDAQ:PMTS) Has Us Very Interested

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at CPI Card Group's (NASDAQ:PMTS) look very promising so lets take a look.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for CPI Card Group, this is the formula:

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

0.22 = US$63m ÷ (US$352m - US$65m) (Based on the trailing twelve months to March 2025).

So, CPI Card Group has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

View our latest analysis for CPI Card Group

In the above chart we have measured CPI Card Group's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for CPI Card Group .

The Trend Of ROCE

CPI Card Group is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 42% more capital is being employed now too. So we're very much inspired by what we're seeing at CPI Card Group thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that CPI Card Group is reaping the rewards from prior investments and is growing its capital base. And a remarkable 752% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

CPI Card Group does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is significant...

CPI Card Group is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.