The Returns At Hd Hyundai MipoLtd (KRX:010620) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. However, after briefly looking over the numbers, we don't think Hd Hyundai MipoLtd (KRX:010620) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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 Hd Hyundai MipoLtd:

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

0.037 = ₩88b ÷ (₩5.1t - ₩2.7t) (Based on the trailing twelve months to December 2024).

So, Hd Hyundai MipoLtd has an ROCE of 3.7%. Ultimately, that's a low return and it under-performs the Machinery industry average of 6.3%.

View our latest analysis for Hd Hyundai MipoLtd

In the above chart we have measured Hd Hyundai MipoLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Hd Hyundai MipoLtd .

What Can We Tell From Hd Hyundai MipoLtd's ROCE Trend?

There hasn't been much to report for Hd Hyundai MipoLtd's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Hd Hyundai MipoLtd doesn't end up being a multi-bagger in a few years time.

On another note, while the change in ROCE trend might not scream for attention, it's interesting that the current liabilities have actually gone up over the last five years. This is intriguing because if current liabilities hadn't increased to 53% of total assets, this reported ROCE would probably be less than3.7% because total capital employed would be higher.The 3.7% ROCE could be even lower if current liabilities weren't 53% of total assets, because the the formula would show a larger base of total capital employed. Additionally, this high level of current liabilities isn't ideal because it means the company's suppliers (or short-term creditors) are effectively funding a large portion of the business.

The Bottom Line On Hd Hyundai MipoLtd's ROCE

We can conclude that in regards to Hd Hyundai MipoLtd's returns on capital employed and the trends, there isn't much change to report on. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 486% gain to shareholders who have held over the last five years. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

While Hd Hyundai MipoLtd doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for A010620 on our platform.

While Hd Hyundai MipoLtd 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.