Returns At UNITEKNOLtd (KOSDAQ:241690) Appear To Be Weighed Down

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think UNITEKNOLtd (KOSDAQ:241690) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What Is 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. The formula for this calculation on UNITEKNOLtd is:

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

0.06 = ₩10b ÷ (₩213b - ₩39b) (Based on the trailing twelve months to March 2024).

Therefore, UNITEKNOLtd has an ROCE of 6.0%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 8.5%.

View 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 Can We Tell From UNITEKNOLtd's ROCE Trend?

The returns on capital haven't changed much for UNITEKNOLtd in recent years. The company has employed 85% more capital in the last five years, and the returns on that capital have remained stable at 6.0%. 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.

In Conclusion...

Long story short, while UNITEKNOLtd has been reinvesting its capital, the returns that it's generating haven't increased. And investors may be recognizing these trends since the stock has only returned a total of 2.0% to shareholders over the last five years. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you'd like to know about the risks facing UNITEKNOLtd, we've discovered 2 warning signs that you should be aware of.

While UNITEKNOLtd 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com