Return Trends At Hyundai MobisLtd (KRX:012330) Aren't Appealing

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. In light of that, when we looked at Hyundai MobisLtd (KRX:012330) and its ROCE trend, we weren't exactly thrilled.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Hyundai MobisLtd, this is the formula:

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

0.049 = ₩2.3t ÷ (₩59t - ₩12t) (Based on the trailing twelve months to December 2023).

Therefore, Hyundai MobisLtd has an ROCE of 4.9%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 9.1%.

See our latest analysis for Hyundai MobisLtd

In the above chart we have measured Hyundai MobisLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Hyundai MobisLtd for free.

So How Is Hyundai MobisLtd's ROCE Trending?

The returns on capital haven't changed much for Hyundai MobisLtd in recent years. The company has employed 34% more capital in the last five years, and the returns on that capital have remained stable at 4.9%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

Our Take On Hyundai MobisLtd's ROCE

As we've seen above, Hyundai MobisLtd's returns on capital haven't increased but it is reinvesting in the business. And investors may be recognizing these trends since the stock has only returned a total of 12% 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.

Hyundai MobisLtd does have some risks though, and we've spotted 1 warning sign for Hyundai MobisLtd that you might be interested in.

While Hyundai MobisLtd 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.