Investors Met With Slowing Returns on Capital At Shinsung Delta TechLtd (KOSDAQ:065350)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Shinsung Delta TechLtd (KOSDAQ:065350), it didn't seem to tick all of these boxes.

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Understanding Return On Capital Employed (ROCE)

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 Shinsung Delta TechLtd:

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

0.061 = ₩26b ÷ (₩934b - ₩503b) (Based on the trailing twelve months to September 2025).

Therefore, Shinsung Delta TechLtd has an ROCE of 6.1%. In absolute terms, that's a low return and it also under-performs the Electrical industry average of 10.0%.

Check out our latest analysis for Shinsung Delta TechLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shinsung Delta TechLtd's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Shinsung Delta TechLtd.

What The Trend Of ROCE Can Tell Us

In terms of Shinsung Delta TechLtd's historical ROCE trend, it doesn't exactly demand attention. The company has employed 136% more capital in the last five years, and the returns on that capital have remained stable at 6.1%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

Another thing to note, Shinsung Delta TechLtd has a high ratio of current liabilities to total assets of 54%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Key Takeaway

As we've seen above, Shinsung Delta TechLtd's returns on capital haven't increased but it is reinvesting in the business. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 924% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Shinsung Delta TechLtd does have some risks though, and we've spotted 2 warning signs for Shinsung Delta TechLtd that you might be interested in.

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. 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.