Returns At Mobase ElectronicsLtd (KOSDAQ:012860) Are On The Way Up

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Mobase ElectronicsLtd (KOSDAQ:012860) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

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 Mobase ElectronicsLtd is:

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

0.12 = ₩40b ÷ (₩796b - ₩461b) (Based on the trailing twelve months to September 2024).

Thus, Mobase ElectronicsLtd has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 8.2% generated by the Auto Components industry.

See our latest analysis for Mobase ElectronicsLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mobase ElectronicsLtd's ROCE against it's prior returns. If you're interested in investigating Mobase ElectronicsLtd's past further, check out this free graph covering Mobase ElectronicsLtd's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Mobase ElectronicsLtd are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. Basically the business is earning more per dollar of capital invested and in addition to that, 60% more capital is being employed now too. So we're very much inspired by what we're seeing at Mobase ElectronicsLtd thanks to its ability to profitably reinvest capital.

On a side note, Mobase ElectronicsLtd's current liabilities are still rather high at 58% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Mobase ElectronicsLtd's ROCE

All in all, it's terrific to see that Mobase ElectronicsLtd is reaping the rewards from prior investments and is growing its capital base. Since the stock has only returned 10% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to know some of the risks facing Mobase ElectronicsLtd we've found 2 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

While Mobase ElectronicsLtd may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.