PG Electroplast (NSE:PGEL) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So when we looked at PG Electroplast (NSE:PGEL) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 PG Electroplast:

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

0.15 = ₹1.8b ÷ (₹16b - ₹4.2b) (Based on the trailing twelve months to December 2023).

Thus, PG Electroplast has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 12% generated by the Electronic industry.

See our latest analysis for PG Electroplast

Above you can see how the current ROCE for PG Electroplast compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for PG Electroplast .

How Are Returns Trending?

Investors would be pleased with what's happening at PG Electroplast. Over the last five years, returns on capital employed have risen substantially to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 465%. So we're very much inspired by what we're seeing at PG Electroplast thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 25%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that PG Electroplast has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

In Conclusion...

All in all, it's terrific to see that PG Electroplast is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 3,003% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 1 warning sign facing PG Electroplast that you might find interesting.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.