Capoue arrived at Vicarage Road shortly after the Hornets were promoted to the Premier League in 2015 from Tottenham.
"The biggest difference since I signed here is the quality of the players – there is more and more quality every season," Capoue.
"A lot of players want to sign for Watford now, nobody is scared to join the club and make very good goals here.
"To reach big goals you need competition between players. With each year there is more competition in every position.
"That is good for the team and good for the coach as he has hard decisions to take to choose the first XI. I hope we keep doing this because we can do very well."