ONEJOON (KOSDAQ:382840) Is Investing Its Capital With Increasing Efficiency

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in ONEJOON's (KOSDAQ:382840) returns on capital, so let's have a look.

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 ONEJOON is:

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

0.20 = ₩26b ÷ (₩237b - ₩108b) (Based on the trailing twelve months to September 2024).

So, ONEJOON has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Machinery industry average of 6.7%.

View our latest analysis for ONEJOON

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

What The Trend Of ROCE Can Tell Us

The trends we've noticed at ONEJOON are quite reassuring. The data shows that returns on capital have increased substantially over the last four years to 20%. The amount of capital employed has increased too, by 301%. 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.

Another thing to note, ONEJOON has a high ratio of current liabilities to total assets of 45%. 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. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

What We Can Learn From ONEJOON's ROCE

All in all, it's terrific to see that ONEJOON is reaping the rewards from prior investments and is growing its capital base. Although the company may be facing some issues elsewhere since the stock has plunged 74% in the last three years. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

While ONEJOON looks impressive, no company is worth an infinite price. The intrinsic value infographic for A382840 helps visualize whether it is currently trading for a fair price.

ONEJOON is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.