Heungkuk MetaltechLtd (KOSDAQ:010240) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Heungkuk MetaltechLtd (KOSDAQ:010240) and its trend of ROCE, we really liked what we saw.

What is 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. Analysts use this formula to calculate it for Heungkuk MetaltechLtd:

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

0.19 = ₩16b ÷ (₩109b - ₩25b) (Based on the trailing twelve months to December 2020).

So, Heungkuk MetaltechLtd has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 5.3% generated by the Machinery industry.

View our latest analysis for Heungkuk MetaltechLtd

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 Heungkuk MetaltechLtd's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Heungkuk MetaltechLtd is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 57%. So we're very much inspired by what we're seeing at Heungkuk MetaltechLtd thanks to its ability to profitably reinvest capital.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Heungkuk MetaltechLtd has. Since the stock has returned a staggering 330% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, Heungkuk MetaltechLtd does come with some risks, and we've found 2 warning signs that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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