The Return Trends At HD Hyundai Heavy IndustriesLtd (KRX:329180) Look Promising

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 HD Hyundai Heavy IndustriesLtd (KRX:329180) so let's look a bit deeper.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Is Return On Capital Employed (ROCE)?

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 HD Hyundai Heavy IndustriesLtd:

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

0.15 = ₩1.1t ÷ (₩21t - ₩13t) (Based on the trailing twelve months to March 2025).

So, HD Hyundai Heavy IndustriesLtd has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 6.5% it's much better.

View our latest analysis for HD Hyundai Heavy IndustriesLtd

Above you can see how the current ROCE for HD Hyundai Heavy IndustriesLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for HD Hyundai Heavy IndustriesLtd .

What The Trend Of ROCE Can Tell Us

HD Hyundai Heavy IndustriesLtd has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 4,032% over the last four years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. The current liabilities has increased to 63% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

The Bottom Line

To bring it all together, HD Hyundai Heavy IndustriesLtd has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 259% to shareholders over the last three years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

While HD Hyundai Heavy IndustriesLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for A329180 helps visualize whether it is currently trading for a fair price.

While HD Hyundai Heavy IndustriesLtd 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.

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

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.