Has Iljin Power (KOSDAQ:094820) Got What It Takes To Become A Multi-Bagger?

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So, when we ran our eye over Iljin Power's (KOSDAQ:094820) trend of ROCE, we liked what we saw.

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. The formula for this calculation on Iljin Power is:

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

0.14 = ₩16b ÷ (₩147b - ₩35b) (Based on the trailing twelve months to June 2020).

Thus, Iljin Power has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 5.7% generated by the Machinery industry.

View our latest analysis for Iljin Power

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

So How Is Iljin Power's ROCE Trending?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 53% in that time. Since 14% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line

In the end, Iljin Power has proven its ability to adequately reinvest capital at good rates of return. And the stock has followed suit returning a meaningful 47% to shareholders over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you want to continue researching Iljin Power, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Iljin Power 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. 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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