Citation:

Aryan B Nair. "Capital Efficiency vs. Revenue Growth: An Empirical Analysis of Long-Term Value Creation in Public Companies (2020–2025)" International Research Journal of Economics and Management Studies, Vol. 4, No. 8, pp. 89-95, 2025. Crossref. http://doi.org/10.56472/25835238/IRJEMS-V4I8P111

Abstract:

This paper examines how two key factors- capital efficiency and revenue growth - shape long-term value creation in companies. Capital efficiency is measured by Return on Invested Capital (ROIC), while growth is captured through the 5-year Compound Annual Growth Rate (CAGR) of revenue. The study looks at 80 companies across multiple sectors, focusing on how well firms balance their growth with the discipline of efficient capital allocation. A correlation analysis is conducted between ROIC and revenue growth, yielding a coefficient of 0.45985, indicating a moderate positive relationship between the two variables. The findings suggest that while rapid revenue growth is an important driver for a company to create long-term value, it is not enough on its own. Long-term performance depends equally on a firm’s ability to generate consistent returns on the capital it invests. Companies that manage to combine both growth and efficiency tend to create stronger, more sustainable shareholder value. In contrast, firms that chase scale without efficiency may face stagnation or underperformance over time.

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Keywords:

Capital Efficiency, Long-Term Value Creation, Correlation Analysis.