SK oceanplantLtd (KRX:100090) Is Looking To Continue Growing Its Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. So on that note, SK oceanplantLtd (KRX:100090) looks quite promising in regards to its trends of return on capital.

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What Is Return On Capital Employed (ROCE)?

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 SK oceanplantLtd:

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

0.052 = ₩44b ÷ (₩1.4t - ₩544b) (Based on the trailing twelve months to March 2025).

Therefore, SK oceanplantLtd has an ROCE of 5.2%. Ultimately, that's a low return and it under-performs the Machinery industry average of 6.5%.

Check out our latest analysis for SK oceanplantLtd

In the above chart we have measured SK oceanplantLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering SK oceanplantLtd for free.

How Are Returns Trending?

SK oceanplantLtd has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 5.2% on its capital. And unsurprisingly, like most companies trying to break into the black, SK oceanplantLtd is utilizing 158% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Bottom Line

In summary, it's great to see that SK oceanplantLtd has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a staggering 375% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing SK oceanplantLtd, we've discovered 2 warning signs that you should be aware of.

While SK oceanplantLtd 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.