Packaging Corporation of America (NYSE:PKG) Is Aiming To Keep Up Its Impressive Returns

If we want to find a stock that can multiply over the long term, what are the underlying trends we should look for? A common method is to try and find a company Returns Along with growing return on capital employed (ROCE). amount Employment of capital. If you see this, it usually means a company with a good business model and plenty of profitable reinvestment opportunities. With that in mind, ROCE’s Packaging Corporation of America (NYSE:PKG) looks attractive right now, so let’s see what the earnings trend can tell us.

What is Return on Capital Employed (ROCE)?

For those who are not sure what ROCE is, it measures the amount of pre-tax profit a company can generate from the capital employed in its business. The formula for this calculation at Packaging Corporation of America is:

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

0.21 = US$1.6b ÷ (US$8.3b – US$963m) (Based on the period preceding twelve months from September 2022).

therefore, Packaging Corporation of America has a ROCE of 21%. That’s an amazing return and not only that, it beats the 11% average earned by companies in the same industry.

Lire Aussi :  Affirmative Action is essential for a Diverse America

Check out Opportunities and risks In the US packaging industry.

rose
NYSE: PKG Return on Capital Employed on November 23, 2022

Above you can see how Packaging Corporation of America’s current ROCE compares to its past return on capital, but there’s only so much you can tell from the past. If you’d like, you can check out forecasts from analysts including Packaging Corporation of America here Free.

What can the trend of ROCE tell us?

In terms of Packaging Corporation of America’s ROCE history, it is quite impressive. Over the past five years the company has leveraged 42% more capital and the return on that capital has remained steady at 21%. Now considering the ROCE is an attractive 21%, this combination is really attractive because the business can constantly put money to work and earn this high income. You see this when looking at businesses that work well or profitable business models.

Lire Aussi :  XAUUSD set to test $1,750, focus on United States data

The key takeaway

Packaging Corporation of America has demonstrated its prowess, generating high returns on employee capital growth, which we are thrilled about. In light of this, the stock has gained just 37% over the past five years for shareholders holding the stock during this period. So because of the trends we are seeing, we recommend looking further into this stock to see if it has the makings of a multi-bagger.

If you want to know more about Packaging Corporation of America, we have identified 2 warning signs, And 1 of them is remarkable.

If you want to see other companies making more money, check out ours Free Here’s a list of top-grossing companies with solid balance sheets.

Valuation is complicated, but we’re helping to simplify it.

Find out Packaging Corporation of America Potentially over or undervalued by reviewing our comprehensive analysis, which includes Fair value estimates, risks and caveats, dividends, insider transactions and financial health.

Lire Aussi :  Was $11.5M Stake in 3-Employee Bank to Bypass License?

View a free analysis

This article by Simply Wall Saint is general in nature. We provide commentary based on historical data and analyst forecasts, and our articles are not intended to be financial advice. It does not recommend buying or selling any stock and does not take into account your objectives or your financial situation. We aim to bring you long-term focused analytics powered by fundamental data. Note that our analysis does not account for recent price-sensitive company announcements or qualitative material. Simply Wall St. has no position in any of the stocks mentioned.

Source

Leave a Reply

Your email address will not be published.

Related Articles

Back to top button