Investors Could Be Concerned With Woongjin's (KRX:016880) Returns On Capital

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Woongjin (KRX:016880), it didn't seem to tick all of these boxes.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Woongjin:

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

0.0086 = ₩34b ÷ (₩5.1t - ₩1.1t) (Based on the trailing twelve months to June 2025).

So, Woongjin has an ROCE of 0.9%. Ultimately, that's a low return and it under-performs the Industrials industry average of 5.4%.

Check out our latest analysis for Woongjin

Historical performance is a great place to start when researching a stock so above you can see the gauge for Woongjin's ROCE against it's prior returns. If you'd like to look at how Woongjin has performed in the past in other metrics, you can view this free graph of Woongjin's past earnings, revenue and cash flow.

How Are Returns Trending?

In terms of Woongjin's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 0.9% from 11% five years ago. However it looks like Woongjin might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

On a related note, Woongjin has decreased its current liabilities to 22% of total assets. So we could link some of this to the decrease in ROCE. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.

In Conclusion...

To conclude, we've found that Woongjin is reinvesting in the business, but returns have been falling. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 315% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

On a separate note, we've found 2 warning signs for Woongjin you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.