If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at PNC Process Systems (SHSE:603690), it didn't seem to tick all of these boxes.
Understanding 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. To calculate this metric for PNC Process Systems, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.054 = CN¥365m ÷ (CN¥12b - CN¥5.0b) (Based on the trailing twelve months to September 2023).
So, PNC Process Systems has an ROCE of 5.4%. In absolute terms, that's a low return but it's around the Machinery industry average of 6.1%.
View our latest analysis for PNC Process Systems
SHSE:603690 Return on Capital Employed December 19th 2023
Above you can see how the current ROCE for PNC Process Systems compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for PNC Process Systems.
What Does the ROCE Trend For PNC Process Systems Tell Us?
Unfortunately, the trend isn't great with ROCE falling from 12% five years ago, while capital employed has grown 1,229%. That being said, PNC Process Systems raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. PNC Process Systems probably hasn't received a full year of earnings yet from the new funds it raised, so these figures should be taken with a grain of salt. Additionally, we found that PNC Process Systems' most recent EBIT figure is around the same as the prior year, so we'd attribute the drop in ROCE mostly to the capital raise.
On a side note, PNC Process Systems has done well to pay down its current liabilities to 42% of total assets. So we could link some of this to the decrease in ROCE. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE. Either way, they're still at a pretty high level, so we'd like to see them fall further if possible.
In Conclusion...
In summary, despite lower returns in the short term, we're encouraged to see that PNC Process Systems is reinvesting for growth and has higher sales as a result. And the stock has followed suit returning a meaningful 90% to shareholders over the last five years. So should these growth trends continue, we'd be optimistic on the stock going forward.
Like most companies, PNC Process Systems does come with some risks, and we've found 2 warning signs that you should be aware of.
While PNC Process Systems isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
如果我們想找到潛在的多功能玩家,通常有潛在的趨勢可以提供線索。理想情況下,企業將呈現兩種趨勢;首先是增長 返回 論資本使用率(ROCE),其次是增加 金額 已動用資本的百分比。基本上,這意味着一家公司有可以繼續進行再投資的盈利計劃,這是複合機的一個特徵。但是,當我們查看 PNC Process Systems(SHSE: 603690)時,它似乎並沒有勾選所有這些方框。
因此,PNC Process Systems的投資回報率爲5.4%。從絕對值來看,這是一個很低的回報,但約爲機械行業的平均水平6.1%。
查看我們對 PNC 過程系統的最新分析
SHSE: 603690 2023 年 12 月 19 日已動用資本回報率
在上方你可以看到PNC Process Systems當前的投資回報率與其先前的資本回報率相比如何,但從過去可以看出來只有這麼多。如果您想了解分析師對未來的預測,則應查看我們的PNC Process Systems免費報告。
PNC 工藝系統的 ROCE 趨勢告訴我們什麼?
不幸的是,這種趨勢並不理想,投資回報率從五年前的12%下降,而資本使用量增長了1,229%。話雖如此,PNC Process Systems在最新業績公佈之前籌集了一些資金,因此這可以部分解釋所用資本的增加。PNC Process Systems可能尚未從其籌集的新資金中獲得整整一年的收益,因此應該對這些數字持保留態度。此外,我們發現PNC Process Systems的最新息稅前收益數字與去年大致相同,因此我們將投資回報率的下降主要歸因於籌資。
順便說一句,PNC Process Systems在將其流動負債償還至總資產的42%方面做得很好。因此,我們可以將其中一些與投資回報率的下降聯繫起來。更重要的是,這可以降低業務風險的某些方面,因爲現在該公司的供應商或短期債權人爲其運營提供的資金減少了。由於該企業基本上是用自己的資金爲更多的業務提供資金,你可以說這降低了企業創造投資回報的效率。不管怎樣,它們仍然處於相當高的水平,因此,如果可能的話,我們希望看到它們進一步下降。
總之...
總而言之,儘管短期內回報率較低,但令我們感到鼓舞的是,PNC Process Systems正在進行再投資以促進增長,從而實現了更高的銷售額。在過去五年中,該股緊隨其後,爲股東帶來了可觀的90%的回報。因此,如果這些增長趨勢持續下去,我們將對該股的未來持樂觀態度。
像大多數公司一樣,PNC Process Systems確實存在一些風險,我們發現了兩個警告信號,你應該注意。
儘管PNC Process Systems的回報率不是最高的,但請查看這份免費清單,列出了資產負債表穩健且股本回報率高的公司。