Here's What's Concerning About Granite Ridge Resources' (NYSE:GRNT) Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. However, after investigating Granite Ridge Resources (NYSE:GRNT), we don't think it's current trends fit the mold of a multi-bagger.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Granite Ridge Resources:

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

0.11 = US$117m ÷ (US$1.1b - US$77m) (Based on the trailing twelve months to September 2025).

Thus, Granite Ridge Resources has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 8.7% generated by the Oil and Gas industry.

View our latest analysis for Granite Ridge Resources

In the above chart we have measured Granite Ridge Resources' 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 Granite Ridge Resources for free.

So How Is Granite Ridge Resources' ROCE Trending?

On the surface, the trend of ROCE at Granite Ridge Resources doesn't inspire confidence. Over the last four years, returns on capital have decreased to 11% from 19% four years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Granite Ridge Resources. These growth trends haven't led to growth returns though, since the stock has fallen 48% over the last five years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

If you'd like to know more about Granite Ridge Resources, we've spotted 4 warning signs, and 1 of them doesn't sit too well with us.

While Granite Ridge Resources 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.