Returns At PN Poong Nyun (KOSDAQ:024940) Are On The Way Up

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 on that note, PN Poong Nyun (KOSDAQ:024940) looks quite promising in regards to its trends of return on capital.

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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. To calculate this metric for PN Poong Nyun, this is the formula:

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

0.018 = ₩920m ÷ (₩57b - ₩6.9b) (Based on the trailing twelve months to December 2024).

Thus, PN Poong Nyun has an ROCE of 1.8%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 7.4%.

View our latest analysis for PN Poong Nyun

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're interested in investigating PN Poong Nyun's past further, check out this free graph covering PN Poong Nyun's past earnings, revenue and cash flow .

What The Trend Of ROCE Can Tell Us

We're delighted to see that PN Poong Nyun is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 1.8% on its capital. Not only that, but the company is utilizing 24% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

One more thing to note, PN Poong Nyun has decreased current liabilities to 12% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that PN Poong Nyun has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Key Takeaway

Overall, PN Poong Nyun gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And a remarkable 242% 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 PN Poong Nyun can keep these trends up, it could have a bright future ahead.

PN Poong Nyun does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those are a bit concerning...

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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.