Returns On Capital - An Important Metric For SaraminHRLtd (KOSDAQ:143240)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at SaraminHRLtd (KOSDAQ:143240) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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 SaraminHRLtd:

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

0.18 = ₩22b ÷ (₩136b - ₩14b) (Based on the trailing twelve months to September 2020).

Thus, SaraminHRLtd has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 10% generated by the Professional Services industry.

See our latest analysis for SaraminHRLtd

In the above chart we have measured SaraminHRLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for SaraminHRLtd.

What Does the ROCE Trend For SaraminHRLtd Tell Us?

SaraminHRLtd is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. Basically the business is earning more per dollar of capital invested and in addition to that, 96% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

To sum it up, SaraminHRLtd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 76% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching SaraminHRLtd, you might be interested to know about the 1 warning sign that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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