The content of this article will benefit those of you who are starting to educate yourself about investing in the stock market and want to begin learning the link between Public Joint Stock Company Territorial Generation Company No 14 (MCX:TGKN)’s return fundamentals and stock market performance.
Territorial Generation Company No. 14 stock represents an ownership share in the company. As a result, your investment is being put to work to fund operations and if you want to earn an attractive return on your investment, the business needs to be making an adequate amount of money from the funds you provide. You need to pay attention to this because your return on investment is linked to dividends and internal investments to improve the business, which can only occur if the company is expected to produce adequate earnings with the capital that has been provided. Therefore, looking at how efficiently Territorial Generation Company No. 14 is able to use capital to create earnings will help us understand your potential return. Investors use many different metrics but the analysis below focuses on return on capital employed (ROCE). Let’s take a look at what it can tell us.View out our latest analysis for Territorial Generation Company No. 14
Calculating Return On Capital Employed for TGKN
Choosing to invest in Territorial Generation Company No. 14 comes at the cost of investing in another potentially favourable company. Therefore all else aside, your investment in a certain company represents a vote of confidence that the money used to buy the stock will grow larger than if invested elsewhere. So the business’ ability to grow the size of your capital is very important and can be assessed by comparing the return on capital you can get on your investment with a hurdle rate that depends on the other return possibilities you can identify. A good metric to use is return on capital employed (ROCE), which helps us gauge how much income can be created from the funds needed to operate the business. This metric will tell us if Territorial Generation Company No. 14 is good at growing investor capital. I have calculated Territorial Generation Company No. 14’s ROCE for you below:
ROCE Calculation for TGKN
Return on Capital Employed (ROCE) = Earnings Before Tax (EBT) ÷ (Capital Employed)
Capital Employed = (Total Assets – Current Liabilities)
∴ ROCE = RUруб425.48m ÷ (RUруб11.94b – RUруб5.62b) = 6.74%
The calculation above shows that TGKN’s earnings were 6.74% of capital employed. Comparing this to a healthy 15% benchmark shows Territorial Generation Company No. 14 is currently unable to return a satisfactory amount to owners for the use of their capital, which isn’t good for investors who have forgone other potentially solid companies.
Why is this the case?
Territorial Generation Company No. 14’s relatively poor ROCE is tied to the movement in two factors that change over time: earnings and capital requirements. At the moment Territorial Generation Company No. 14 is in an adverse position, but this can change if these factors improve. Therefore, investors need to understand the trend of the inputs in the formula above, so that they can see if there is an opportunity to invest. Three years ago, TGKN’s ROCE was 5.43%, which means the company’s capital returns have improved. Over the same period, EBT went from RUруб385.65m to RUруб425.48m and the amount of capital employed fell in response to a decreased level of total assets and a larger reliance on current liabilities (increased borrowing to fund operations) , which means the company has been able to improve ROCE by growing earnings and simultaneously putting less capital to work.
Although Territorial Generation Company No. 14’s ROCE is currently below the acceptable benchmark, the company has triggered an upward trend over the recent past which could signal an opportunity for a solid return on investment in the long term. Before making any decisions, ROCE does not tell the whole picture so you need to pay attention to other fundamentals like future prospects and management ability to determine if an opportunity exists that isn’t made apparent by looking at past data. Territorial Generation Company No. 14’s fundamentals can be explored with the links I’ve provided below if you are interested, otherwise you can start looking at other high-performing stocks.
- Future Outlook: What are well-informed industry analysts predicting for TGKN’s future growth? Take a look at our free research report of analyst consensus for TGKN’s outlook.
- Management:Have insiders been ramping up their shares to take advantage of the market’s sentiment for Territorial Generation Company No. 14’s future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.