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

What underlying trends should we be looking for if we want to find a stock that can double over the long term?A common approach is to try and find a company that has return Increased capital employed (ROCE), and growing quantity capital employed. If you see this, it usually means it’s a company with a sound business model and plenty of profitable reinvestment opportunities. With this in mind, ROCE american packaging co. (NYSE:PKG ) looks attractive right now, so let’s see what returns trends can tell us.

What is Return on Capital Employed (ROCE)?

For those who aren’t sure what ROCE is, it measures the amount of pre-tax profit a company can generate from the capital employed in its business. The calculation formula of American Packaging Company is:

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

0.21 = $1.6 ÷ ($8.3 – $963 million) (Based on last twelve months to September 2022).

so, American Packaging has a ROCE of 21%. That’s a terrific return, and more than that, it beats the average return of 11% for companies in similar industries.

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Check Opportunities and Risks within the U.S. packaging industry.

NYSE: PKG Return on Capital Employed Nov 23, 2022

In the graph above, you can see how American Packaging’s current ROCE compares to its previous return on capital, but you can only know so much from the past.If you prefer, you can view forecasts from analysts covering US packaging companies here free.

What ROCE trends can tell us

That’s pretty impressive in terms of American Packaging’s ROCE history. The company has increased its employed capital by 42% over the past five years, delivering a steady 21% return on capital. Now considering the ROCE is an attractive 21%, this combination is actually very attractive because it means that the business can consistently invest money and generate these high returns. You’ll see this when looking at well-run businesses or profitable business models.

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key points

We are very excited that Packaging Corporation of America has demonstrated its ability to generate high returns through its increasing use of capital. With that in mind, the stock has only gained 37% over the past five years for shareholders who held on to it during that period. Therefore, given the trends we’re seeing, we recommend looking further into this stock to see if it has what it takes to be a bull.

If you’d like to learn more about American Packaging, we’ve found 2 warning signs, 1 of them is important.

If you want to see other companies earn high returns, check out our free Get a list of companies with high returns and strong balance sheets here.

Valuation is complicated, but we’re helping make it simple.

find out if american packaging co. It may be overvalued or undervalued by viewing our comprehensive analysis, which includes Fair value estimates, risks and caveats, dividends, insider trading and financial health.

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This article by Simply Wall St is general in nature. We use only an unbiased methodology to provide reviews based on historical data and analyst forecasts, 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 into account your objectives or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any of the stocks mentioned.


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