Returns On Capital At KEPCO Plant Service & EngineeringLtd (KRX:051600) Have Hit The Brakes

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over KEPCO Plant Service & EngineeringLtd's (KRX:051600) trend of ROCE, we liked what we saw.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for KEPCO Plant Service & EngineeringLtd:

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

0.16 = ₩209b ÷ (₩1.7t - ₩347b) (Based on the trailing twelve months to December 2024).

Thus, KEPCO Plant Service & EngineeringLtd has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 6.9% generated by the Commercial Services industry.

Check out our latest analysis for KEPCO Plant Service & EngineeringLtd

In the above chart we have measured KEPCO Plant Service & EngineeringLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for KEPCO Plant Service & EngineeringLtd .

What Does the ROCE Trend For KEPCO Plant Service & EngineeringLtd Tell Us?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 16% and the business has deployed 21% more capital into its operations. 16% is a pretty standard return, and it provides some comfort knowing that KEPCO Plant Service & EngineeringLtd has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On KEPCO Plant Service & EngineeringLtd's ROCE

In the end, KEPCO Plant Service & EngineeringLtd has proven its ability to adequately reinvest capital at good rates of return. Therefore it's no surprise that shareholders have earned a respectable 58% return if they held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

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While KEPCO Plant Service & EngineeringLtd 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.