Investors Will Want Englewood Lab's (KOSDAQ:950140) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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 Englewood Lab's (KOSDAQ:950140) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Englewood Lab is:

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

0.17 = ₩23b ÷ (₩181b - ₩43b) (Based on the trailing twelve months to September 2024).

So, Englewood Lab has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Professional Services industry average of 11% it's much better.

See our latest analysis for Englewood Lab

Historical performance is a great place to start when researching a stock so above you can see the gauge for Englewood Lab's ROCE against it's prior returns. If you're interested in investigating Englewood Lab's past further, check out this free graph covering Englewood Lab's past earnings, revenue and cash flow.

What Can We Tell From Englewood Lab's ROCE Trend?

Englewood Lab is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 81% more capital is being employed now too. So we're very much inspired by what we're seeing at Englewood Lab thanks to its ability to profitably reinvest capital.

Our Take On Englewood Lab's ROCE

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 Englewood Lab has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 61% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

Englewood Lab does have some risks though, and we've spotted 3 warning signs for Englewood Lab that you might be interested in.

While Englewood Lab 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.