PPL (NYSE:PPL) Has More To Do To Multiply In Value Going Forward

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at PPL (NYSE:PPL) and its ROCE trend, we weren't exactly thrilled.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on PPL is:

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

0.052 = US$2.0b ÷ (US$44b - US$4.7b) (Based on the trailing twelve months to September 2025).

So, PPL has an ROCE of 5.2%. Even though it's in line with the industry average of 5.3%, it's still a low return by itself.

See our latest analysis for PPL

In the above chart we have measured PPL's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for PPL .

The Trend Of ROCE

There hasn't been much to report for PPL'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. With that in mind, unless investment picks up again in the future, we wouldn't expect PPL to be a multi-bagger going forward. With fewer investment opportunities, it makes sense that PPL has been paying out a decent 58% of its earnings to shareholders. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

The Key Takeaway

In a nutshell, PPL has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has gained an impressive 51% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

PPL does have some risks, we noticed 2 warning signs (and 1 which is significant) we think you should know about.

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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.