Returns Are Gaining Momentum At TaewoongLtd (KOSDAQ:044490)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at TaewoongLtd (KOSDAQ:044490) so let's look a bit deeper.

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. Analysts use this formula to calculate it for TaewoongLtd:

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

0.053 = ₩34b ÷ (₩739b - ₩95b) (Based on the trailing twelve months to June 2024).

Therefore, TaewoongLtd has an ROCE of 5.3%. On its own, that's a low figure but it's around the 6.4% average generated by the Machinery industry.

Check out our latest analysis for TaewoongLtd

In the above chart we have measured TaewoongLtd'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 TaewoongLtd .

What The Trend Of ROCE Can Tell Us

Like most people, we're pleased that TaewoongLtd is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 5.3% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 28%. TaewoongLtd could be selling under-performing assets since the ROCE is improving.

In Conclusion...

In the end, TaewoongLtd has proven it's capital allocation skills are good with those higher returns from less amount of capital. Considering the stock has delivered 36% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

While TaewoongLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for A044490 helps visualize whether it is currently trading for a fair price.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.