The Returns At Hyundai MobisLtd (KRX:012330) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Hyundai MobisLtd (KRX:012330) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

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 Hyundai MobisLtd is:

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

0.048 = ₩2.4t ÷ (₩63t - ₩13t) (Based on the trailing twelve months to June 2024).

Therefore, Hyundai MobisLtd has an ROCE of 4.8%. 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 to see what analysts are forecasting going forward, you should check out our free analyst report for Hyundai MobisLtd .

What Does the ROCE Trend For Hyundai MobisLtd Tell Us?

There are better returns on capital out there than what we're seeing at Hyundai MobisLtd. The company has employed 38% more capital in the last five years, and the returns on that capital have remained stable at 4.8%. 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.

What We Can Learn From Hyundai MobisLtd's ROCE

In conclusion, Hyundai MobisLtd has been investing more capital into the business, but returns on that capital haven't increased. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger 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.