YUNSUNG F&CLtd (KOSDAQ:372170) Hasn't Managed To Accelerate Its Returns

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Although, when we looked at YUNSUNG F&CLtd (KOSDAQ:372170), it didn't seem to tick all of these boxes.

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. To calculate this metric for YUNSUNG F&CLtd, this is the formula:

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

0.16 = ₩29b ÷ (₩350b - ₩161b) (Based on the trailing twelve months to March 2024).

Therefore, YUNSUNG F&CLtd has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 6.3% generated by the Machinery industry.

See our latest analysis for YUNSUNG F&CLtd

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'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.

What Can We Tell From YUNSUNG F&CLtd's ROCE Trend?

There hasn't been much to report for YUNSUNG F&CLtd's returns and its level of capital employed because both metrics have been steady for the past one year. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect YUNSUNG F&CLtd to be a multi-bagger going forward.

Another thing to note, YUNSUNG F&CLtd has a high ratio of current liabilities to total assets of 46%. 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 Bottom Line On YUNSUNG F&CLtd's ROCE

In a nutshell, YUNSUNG F&CLtd has been trudging along with the same returns from the same amount of capital over the last one year. Moreover, since the stock has crumbled 74% over the last year, it appears investors are expecting the worst. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you'd like to know more about YUNSUNG F&CLtd, we've spotted 2 warning signs, and 1 of them is concerning.

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.

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