Shareholders Would Enjoy A Repeat Of DYPNFLtd's (KOSDAQ:104460) Recent Growth In Returns

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of DYPNFLtd (KOSDAQ:104460) we really liked what we saw.

Understanding 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 DYPNFLtd is:

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

0.32 = ₩33b ÷ (₩153b - ₩48b) (Based on the trailing twelve months to December 2020).

So, DYPNFLtd has an ROCE of 32%. In absolute terms that's a great return and it's even better than the Machinery industry average of 5.3%.

Check out our latest analysis for DYPNFLtd

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 want to delve into the historical earnings, revenue and cash flow of DYPNFLtd, check out these free graphs here.

What Does the ROCE Trend For DYPNFLtd Tell Us?

We like the trends that we're seeing from DYPNFLtd. The data shows that returns on capital have increased substantially over the last five years to 32%. The amount of capital employed has increased too, by 77%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

To sum it up, DYPNFLtd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 530% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for DYPNFLtd (of which 1 is potentially serious!) that you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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