If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in Groupon's (NASDAQ:GRPN) returns on capital, so let's have a look.

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 Groupon is:

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

0.035 = US$9.6m ÷ (US$608m - US$337m) (Based on the trailing twelve months to September 2025).

Thus, Groupon has an ROCE of 3.5%. In absolute terms, that's a low return and it also under-performs the Multiline Retail industry average of 11%.

Above you can see how the current ROCE for Groupon compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Groupon .

What The Trend Of ROCE Can Tell Us

Like most people, we're pleased that Groupon is now generating some pretax earnings. While the business is profitable now, it used to be incurring losses on invested capital five years ago. 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 42%. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

Another thing to note, Groupon has a high ratio of current liabilities to total assets of 55%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Groupon's ROCE

In a nutshell, we're pleased to see that Groupon has been able to generate higher returns from less capital. Astute investors may have an opportunity here because the stock has declined 59% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Groupon, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Groupon may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity.

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.