Vitzro Tech's (KOSDAQ:042370) Returns On Capital Not Reflecting Well On The Business

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Vitzro Tech (KOSDAQ:042370), we don't think it's current trends fit the mold of a multi-bagger.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Vitzro Tech, this is the formula:

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

0.082 = ₩36b ÷ (₩553b - ₩118b) (Based on the trailing twelve months to September 2024).

So, Vitzro Tech has an ROCE of 8.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.7%.

Check out our latest analysis for Vitzro Tech

Historical performance is a great place to start when researching a stock so above you can see the gauge for Vitzro Tech's ROCE against it's prior returns. If you'd like to look at how Vitzro Tech has performed in the past in other metrics, you can view this free graph of Vitzro Tech's past earnings, revenue and cash flow.

So How Is Vitzro Tech's ROCE Trending?

On the surface, the trend of ROCE at Vitzro Tech doesn't inspire confidence. Around five years ago the returns on capital were 13%, but since then they've fallen to 8.2%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On Vitzro Tech's ROCE

To conclude, we've found that Vitzro Tech is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 22% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

One more thing, we've spotted 1 warning sign facing Vitzro Tech that you might find interesting.

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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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.