Motorpoint Group's Declining Returns on Capital Raise Concerns Among Investors

Investors in Motorpoint Group (LON:MOTR) are facing a familiar dilemma: how to interpret a company that still boasts strong returns but is showing clear signs of a slowdown. A closer look at the firm's fundamental metrics reveals a concerning trend that may explain the stock's 52% decline over the past five years.

Return on Capital Employed (ROCE), a key measure of how efficiently a company generates profits from its capital, has been on a steady descent at Motorpoint. Currently standing at 21%—still an impressive figure that outpaces the specialty retail industry average of 13%—this marks a substantial drop from the 30% ROCE the company achieved five years ago.

"The numbers tell a story of diminishing efficiency," said financial analyst Marcus Thorne of Veritas Analytics. "When ROCE declines while capital employed remains flat, it typically indicates a mature business struggling to find new growth avenues. Motorpoint appears to be extracting less profit from each pound invested than it did previously."

The situation is further complicated by Motorpoint's balance sheet. Current liabilities have ballooned to 73% of total assets over the same five-year period, meaning a significant portion of operations is effectively financed by suppliers and short-term creditors. While this can boost ROCE calculations in the short term, it introduces additional financial risk and suggests the underlying ROCE might be even weaker than reported.

Motorpoint operates in the competitive used car market, which has faced significant headwinds including supply chain disruptions, shifting consumer preferences, and economic uncertainty. The company's declining returns suggest it may be losing its competitive edge in this challenging environment.

Investor Perspectives

Sarah Chen, Portfolio Manager at Cedarwood Capital: "This is a classic case of a good company facing sector-wide challenges. The ROCE decline is concerning, but 21% still represents quality management. I'm watching their inventory turnover and digital strategy closely before making any decisions."

David Reeves, Retail Analyst at Market Insight Ltd: "The used car market is undergoing fundamental change with the rise of online platforms and subscription models. Motorpoint's traditional brick-and-mortar model may be showing its age. Their capital efficiency decline suggests they're struggling to adapt."

Michael Rostov, Independent Investor: "This is exactly why I sold my position last year. A 30-point drop in ROCE? Soaring liabilities? The management team is either incompetent or deliberately obscuring the real financial picture. The 52% stock crash doesn't surprise me at all—this company is circling the drain while pretending everything's fine."

Eleanor Shaw, Long-term Shareholder: "I've held MOTR through ups and downs for eight years. Yes, the recent trends worry me, but the automotive sector is cyclical. They still generate decent returns and have market leadership. I'm concerned but not panicked—this might represent a buying opportunity if management addresses the liability issue."

Motorpoint's situation highlights the importance of looking beyond surface-level metrics. While a 21% ROCE would normally signal a healthy business, the consistent downward trajectory and balance sheet concerns suggest deeper issues. With the stock already reflecting significant pessimism, much will depend on whether management can reverse these trends in the coming quarters.

Note: ROCE calculation: EBIT (£16m) ÷ (Total Assets £280m - Current Liabilities £206m) = 21% based on trailing twelve months to September 2025.