Some Investors May Be Worried About JINSUNG T.E.C's (KOSDAQ:036890) Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating JINSUNG T.E.C (KOSDAQ:036890), we don't think it's current trends fit the mold of a multi-bagger.

Our free stock report includes 1 warning sign investors should be aware of before investing in JINSUNG T.E.C. Read for free now.

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. Analysts use this formula to calculate it for JINSUNG T.E.C:

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

0.087 = ₩24b ÷ (₩455b - ₩173b) (Based on the trailing twelve months to December 2024).

Therefore, JINSUNG T.E.C has an ROCE of 8.7%. In absolute terms, that's a low return, but it's much better than the Machinery industry average of 6.2%.

Check out our latest analysis for JINSUNG T.E.C

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'd like to look at how JINSUNG T.E.C has performed in the past in other metrics, you can view this free graph of JINSUNG T.E.C's past earnings, revenue and cash flow.

What Can We Tell From JINSUNG T.E.C's ROCE Trend?

On the surface, the trend of ROCE at JINSUNG T.E.C doesn't inspire confidence. To be more specific, ROCE has fallen from 19% over the last five years. And considering revenue has dropped while employing more capital, we'd be cautious. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

The Key Takeaway

We're a bit apprehensive about JINSUNG T.E.C because despite more capital being deployed in the business, returns on that capital and sales have both fallen. Since the stock has skyrocketed 104% over the last five years, it looks like investors have high expectations of the stock. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

One more thing, we've spotted 1 warning sign facing JINSUNG T.E.C that you might find interesting.

While JINSUNG T.E.C 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.