The Returns At GnBS ecoLtd (KOSDAQ:382800) Aren't Growing

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. 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, the ROCE of GnBS ecoLtd (KOSDAQ:382800) looks decent, right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for GnBS ecoLtd:

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

0.13 = ₩15b ÷ (₩129b - ₩12b) (Based on the trailing twelve months to June 2024).

So, GnBS ecoLtd has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 6.5% generated by the Machinery industry.

See our latest analysis for GnBS ecoLtd

Above you can see how the current ROCE for GnBS ecoLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for GnBS ecoLtd .

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. The company has employed 627% more capital in the last five years, and the returns on that capital have remained stable at 13%. 13% is a pretty standard return, and it provides some comfort knowing that GnBS ecoLtd has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 9.3% of total assets, is good to see from a business owner's perspective. Effectively suppliers now fund less of the business, which can lower some elements of risk.

What We Can Learn From GnBS ecoLtd's ROCE

The main thing to remember is that GnBS ecoLtd has proven its ability to continually reinvest at respectable rates of return. Yet over the last three years the stock has declined 31%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

One more thing: We've identified 3 warning signs with GnBS ecoLtd (at least 1 which is a bit unpleasant) , and understanding them would certainly be useful.

While GnBS ecoLtd may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.