PannErgy Nyrt (BUSE:PANNERGY) Shareholders Will Want The ROCE Trajectory To Continue

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at PannErgy Nyrt (BUSE:PANNERGY) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for PannErgy Nyrt, this is the formula:

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

0.097 = Ft2.3b ÷ (Ft27b - Ft3.2b) (Based on the trailing twelve months to June 2023).

So, PannErgy Nyrt has an ROCE of 9.7%. On its own that's a low return, but compared to the average of 7.6% generated by the Renewable Energy industry, it's much better.

View our latest analysis for PannErgy Nyrt

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how PannErgy Nyrt has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

PannErgy Nyrt's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 236% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On PannErgy Nyrt's ROCE

In summary, we're delighted to see that PannErgy Nyrt has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 89% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, PannErgy Nyrt does come with some risks, and we've found 3 warning signs that you should be aware of.

While PannErgy Nyrt 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.