Investors Will Want YUNSUNG F&CLtd's (KOSDAQ:372170) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. With that in mind, we've noticed some promising trends at YUNSUNG F&CLtd (KOSDAQ:372170) so let's look a bit deeper.

What Is 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. The formula for this calculation on YUNSUNG F&CLtd is:

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

0.19 = ₩37b ÷ (₩333b - ₩137b) (Based on the trailing twelve months to June 2024).

Thus, YUNSUNG F&CLtd has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 6.2% it's much better.

View our latest analysis for YUNSUNG F&CLtd

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

How Are Returns Trending?

The trends we've noticed at YUNSUNG F&CLtd are quite reassuring. The data shows that returns on capital have increased substantially over the last one year to 19%. The amount of capital employed has increased too, by 21%. 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.

One more thing to note, YUNSUNG F&CLtd has decreased current liabilities to 41% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see. Nevertheless, there are some potential risks the company is bearing with current liabilities that high, so just keep that in mind.

In Conclusion...

All in all, it's terrific to see that YUNSUNG F&CLtd is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 67% over the last year, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know more about YUNSUNG F&CLtd, we've spotted 3 warning signs, and 1 of them can't be ignored.

While YUNSUNG F&CLtd 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. 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.