Doosan Bobcat (KRX:241560) Is Experiencing Growth In Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. With that in mind, we've noticed some promising trends at Doosan Bobcat (KRX:241560) so let's look a bit deeper.

Understanding 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. The formula for this calculation on Doosan Bobcat is:

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

0.16 = US$1.0b ÷ (US$8.3b - US$2.1b) (Based on the trailing twelve months to March 2024).

Therefore, Doosan Bobcat has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 6.3% generated by the Machinery industry.

View our latest analysis for Doosan Bobcat

Above you can see how the current ROCE for Doosan Bobcat compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Doosan Bobcat .

So How Is Doosan Bobcat's ROCE Trending?

We like the trends that we're seeing from Doosan Bobcat. The data shows that returns on capital have increased substantially over the last five years to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 25%. 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.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Doosan Bobcat has. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 36% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

Doosan Bobcat does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

While Doosan Bobcat 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com