Returns At PGF Polska Grupa Fotowoltaiczna (WSE:PGV) Are On The Way Up

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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 PGF Polska Grupa Fotowoltaiczna (WSE:PGV) so let's look a bit deeper.

What is 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. The formula for this calculation on PGF Polska Grupa Fotowoltaiczna is:

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

0.0011 = zł201k ÷ (zł193m - zł11m) (Based on the trailing twelve months to December 2020).

Therefore, PGF Polska Grupa Fotowoltaiczna has an ROCE of 0.1%. Ultimately, that's a low return and it under-performs the Machinery industry average of 7.1%.

See our latest analysis for PGF Polska Grupa Fotowoltaiczna

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're interested in investigating PGF Polska Grupa Fotowoltaiczna's past further, check out this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

We're delighted to see that PGF Polska Grupa Fotowoltaiczna is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 0.1% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, PGF Polska Grupa Fotowoltaiczna is utilizing 69% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a related note, the company's ratio of current liabilities to total assets has decreased to 5.5%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that PGF Polska Grupa Fotowoltaiczna has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

In Conclusion...

In summary, it's great to see that PGF Polska Grupa Fotowoltaiczna has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 493% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if PGF Polska Grupa Fotowoltaiczna can keep these trends up, it could have a bright future ahead.

PGF Polska Grupa Fotowoltaiczna does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is significant...

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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