Investors Will Want Kib plug energy's (KRX:015590) Growth In ROCE To Persist

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. With that in mind, we've noticed some promising trends at Kib plug energy (KRX:015590) so let's look a bit deeper.

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

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. Analysts use this formula to calculate it for Kib plug energy:

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

0.062 = ₩8.6b ÷ (₩214b - ₩74b) (Based on the trailing twelve months to March 2024).

So, Kib plug energy has an ROCE of 6.2%. Even though it's in line with the industry average of 6.5%, it's still a low return by itself.

See our latest analysis for Kib plug energy

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 Kib plug energy's past further, check out this free graph covering Kib plug energy's past earnings, revenue and cash flow.

The Trend Of ROCE

Kib plug energy has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 6.2% which is a sight for sore eyes. Not only that, but the company is utilizing 68% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

One more thing to note, Kib plug energy has decreased current liabilities to 35% 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.

The Key Takeaway

In summary, it's great to see that Kib plug energy has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 36% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a final note, we found 5 warning signs for Kib plug energy (1 doesn't sit too well with us) you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.