Has DTR Automotive (KRX:007340) Got What It Takes To Become A Multi-Bagger?

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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 investigating DTR Automotive (KRX:007340), we don't think it's current trends fit the mold of a multi-bagger.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for DTR Automotive, this is the formula:

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

0.096 = ₩65b ÷ (₩956b - ₩280b) (Based on the trailing twelve months to September 2020).

Therefore, DTR Automotive has an ROCE of 9.6%. In absolute terms, that's a low return, but it's much better than the Auto Components industry average of 4.1%.

See our latest analysis for DTR Automotive

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating DTR Automotive's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From DTR Automotive's ROCE Trend?

There hasn't been much to report for DTR Automotive's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect DTR Automotive to be a multi-bagger going forward.

The Bottom Line On DTR Automotive's ROCE

We can conclude that in regards to DTR Automotive's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 12% so the market doesn't look too hopeful on these trends strengthening any time soon. 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 want to continue researching DTR Automotive, you might be interested to know about the 1 warning sign that our analysis has discovered.

While DTR Automotive 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. 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.
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