Capital Allocation Trends At Ecopro Hn (KOSDAQ:383310) Aren't Ideal

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Ecopro Hn (KOSDAQ:383310) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Ecopro Hn, this is the formula:

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

0.056 = ₩20b ÷ (₩438b - ₩75b) (Based on the trailing twelve months to June 2025).

So, Ecopro Hn has an ROCE of 5.6%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 8.3%.

Check out our latest analysis for Ecopro Hn

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'd like to look at how Ecopro Hn has performed in the past in other metrics, you can view this free graph of Ecopro Hn's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

We weren't thrilled with the trend because Ecopro Hn's ROCE has reduced by 85% over the last three years, while the business employed 358% more capital. However, some of the increase in capital employed could be attributed to the recent capital raising that's been completed prior to their latest reporting period, so keep that in mind when looking at the ROCE decrease. The funds raised likely haven't been put to work yet so it's worth watching what happens in the future with Ecopro Hn's earnings and if they change as a result from the capital raise.

On a side note, Ecopro Hn has done well to pay down its current liabilities to 17% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.

The Bottom Line

To conclude, we've found that Ecopro Hn is reinvesting in the business, but returns have been falling. Since the stock has declined 47% over the last three years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Ecopro Hn does come with some risks though, we found 4 warning signs in our investment analysis, and 3 of those are concerning...

While Ecopro Hn 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.