Return Trends At UNITEKNOLtd (KOSDAQ:241690) Aren't Appealing

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. However, after investigating UNITEKNOLtd (KOSDAQ:241690), we don't think it's current trends fit the mold of a multi-bagger.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for UNITEKNOLtd:

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

0.067 = ₩11b ÷ (₩210b - ₩40b) (Based on the trailing twelve months to December 2023).

So, UNITEKNOLtd has an ROCE of 6.7%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 9.1%.

Check out our latest analysis for UNITEKNOLtd

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

What Does the ROCE Trend For UNITEKNOLtd Tell Us?

The returns on capital haven't changed much for UNITEKNOLtd in recent years. The company has consistently earned 6.7% for the last five years, and the capital employed within the business has risen 85% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

Our Take On UNITEKNOLtd's ROCE

Long story short, while UNITEKNOLtd has been reinvesting its capital, the returns that it's generating haven't increased. And investors appear hesitant that the trends will pick up because the stock has fallen 57% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you'd like to know about the risks facing UNITEKNOLtd, we've discovered 1 warning sign that you should be aware of.

While UNITEKNOLtd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.