Under The Bonnet, COWELL FASHIONLtd's (KOSDAQ:033290) Returns Look Impressive

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. And in light of that, the trends we're seeing at COWELL FASHIONLtd's (KOSDAQ:033290) look very promising so lets take a look.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for COWELL FASHIONLtd, this is the formula:

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

0.25 = ₩78b ÷ (₩372b - ₩61b) (Based on the trailing twelve months to December 2020).

Therefore, COWELL FASHIONLtd has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Luxury industry average of 7.4%.

See our latest analysis for COWELL FASHIONLtd

In the above chart we have measured COWELL FASHIONLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for COWELL FASHIONLtd.

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at COWELL FASHIONLtd. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 25%. The amount of capital employed has increased too, by 127%. So we're very much inspired by what we're seeing at COWELL FASHIONLtd thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that COWELL FASHIONLtd is reaping the rewards from prior investments and is growing its capital base. And with a respectable 92% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

COWELL FASHIONLtd does have some risks though, and we've spotted 1 warning sign for COWELL FASHIONLtd that you might be interested in.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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