Is Tuksu Engineering & ConstructionLtd (KOSDAQ:026150) A Future Multi-bagger?

If you're looking for a multi-bagger, there's a few things to 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Tuksu Engineering & ConstructionLtd (KOSDAQ:026150) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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. The formula for this calculation on Tuksu Engineering & ConstructionLtd is:

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

0.018 = ₩2.0b ÷ (₩169b - ₩55b) (Based on the trailing twelve months to September 2020).

Thus, Tuksu Engineering & ConstructionLtd has an ROCE of 1.8%. Ultimately, that's a low return and it under-performs the Construction industry average of 9.4%.

View our latest analysis for Tuksu Engineering & ConstructionLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Tuksu Engineering & ConstructionLtd's ROCE against it's prior returns. If you're interested in investigating Tuksu Engineering & ConstructionLtd's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Tuksu Engineering & ConstructionLtd Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last three years, returns on capital employed have risen substantially to 1.8%. 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 47%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From Tuksu Engineering & ConstructionLtd's ROCE

In summary, it's great to see that Tuksu Engineering & ConstructionLtd can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 128% 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, Tuksu Engineering & ConstructionLtd does come with some risks, and we've found 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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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