Yahoo Finance PWO (ETR:PWO) Has More To Do To Multiply In Value Going Forward
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at PWO (ETR:PWO), it didn't seem to tick all of these boxes.
What Is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for PWO:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.098 = €26m ÷ (€425m - €162m) (Based on the trailing twelve months to September 2023).
So, PWO has an ROCE of 9.8%. On its own, that's a low figure but it's around the 11% average generated by the Auto Components industry.
Check out our latest analysis for PWO
Above you can see how the current ROCE for PWO compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering PWO for free.
What Can We Tell From PWO's ROCE Trend?
There hasn't been much to report for PWO's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if PWO doesn't end up being a multi-bagger in a few years time.
The Bottom Line
We can conclude that in regards to PWO's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 25% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.
On a final note, we've found 4 warning signs for PWO that we think you should be aware of.
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.
