The Return Trends At SAMJIN (KOSDAQ:032750) Look Promising

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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 looked at SAMJIN (KOSDAQ:032750) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on SAMJIN is:

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

0.14 = ₩12b ÷ (₩103b - ₩17b) (Based on the trailing twelve months to September 2020).

Thus, SAMJIN has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Consumer Durables industry.

See our latest analysis for SAMJIN

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

So How Is SAMJIN's ROCE Trending?

SAMJIN is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 14%. Basically the business is earning more per dollar of capital invested and in addition to that, 33% more capital is being employed now too. So we're very much inspired by what we're seeing at SAMJIN thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that SAMJIN can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Considering the stock has delivered 28% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you'd like to know about the risks facing SAMJIN, we've discovered 3 warning signs that you should be aware of.

While SAMJIN isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. 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.
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