Here’s What’s Happening With Returns At Duoback (KOSDAQ:073190)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Speaking of which, we noticed some great changes in Duoback's (KOSDAQ:073190) returns on capital, so let's have a look.

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 Duoback:

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

0.022 = ₩618m ÷ (₩34b - ₩6.1b) (Based on the trailing twelve months to December 2020).

Therefore, Duoback has an ROCE of 2.2%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 12%.

Check out our latest analysis for Duoback

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 want to delve into the historical earnings, revenue and cash flow of Duoback, check out these free graphs here.

What Does the ROCE Trend For Duoback Tell Us?

Like most people, we're pleased that Duoback is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 2.2% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 25%. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

In Conclusion...

In a nutshell, we're pleased to see that Duoback has been able to generate higher returns from less capital. And a remarkable 113% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Duoback can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 3 warning signs facing Duoback that you might find interesting.

While Duoback isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. 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.
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