Will WINIADIMCHAELtd (KOSDAQ:071460) Repeat Its Return Growth Of The Past?

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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 when we looked at the ROCE trend of WINIADIMCHAELtd (KOSDAQ:071460) 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. To calculate this metric for WINIADIMCHAELtd, this is the formula:

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

0.20 = ₩41b ÷ (₩581b - ₩380b) (Based on the trailing twelve months to September 2020).

Thus, WINIADIMCHAELtd has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 8.3% earned by companies in a similar industry.

See our latest analysis for WINIADIMCHAELtd

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

What Can We Tell From WINIADIMCHAELtd's ROCE Trend?

Investors would be pleased with what's happening at WINIADIMCHAELtd. Over the last five years, returns on capital employed have risen substantially to 20%. Basically the business is earning more per dollar of capital invested and in addition to that, 125% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

On a side note, WINIADIMCHAELtd's current liabilities are still rather high at 65% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line On WINIADIMCHAELtd's ROCE

To sum it up, WINIADIMCHAELtd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the total return from the stock has been almost flat over the last three years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.

WINIADIMCHAELtd does have some risks, we noticed 3 warning signs (and 1 which is a bit concerning) we think you should know about.

WINIADIMCHAELtd is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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