Yahoo Finance The Return Trends At Public Service Enterprise Group (NYSE:PEG) Look Promising
There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Public Service Enterprise Group (NYSE:PEG) looks quite promising in regards to its trends of return on capital.
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. To calculate this metric for Public Service Enterprise Group, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.079 = US$3.5b ÷ (US$49b - US$5.4b) (Based on the trailing twelve months to March 2023).
So, Public Service Enterprise Group has an ROCE of 7.9%. On its own that's a low return, but compared to the average of 5.0% generated by the Integrated Utilities industry, it's much better.
View our latest analysis for Public Service Enterprise Group
Above you can see how the current ROCE for Public Service Enterprise Group 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 Public Service Enterprise Group.
What The Trend Of ROCE Can Tell Us
Public Service Enterprise Group has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 22% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
Our Take On Public Service Enterprise Group's ROCE
To bring it all together, Public Service Enterprise Group has done well to increase the returns it's generating from its capital employed. Considering the stock has delivered 38% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.
If you'd like to know more about Public Service Enterprise Group, we've spotted 2 warning signs, and 1 of them 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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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.
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