Returns Are Gaining Momentum At Taihan Textile (KRX:001070)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Taihan Textile (KRX:001070) looks quite promising in regards to its trends of return on capital.

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What Is 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 Taihan Textile is:

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

0.015 = ₩2.1b ÷ (₩194b - ₩53b) (Based on the trailing twelve months to March 2025).

Therefore, Taihan Textile has an ROCE of 1.5%. In absolute terms, that's a low return and it also under-performs the Luxury industry average of 6.2%.

View our latest analysis for Taihan Textile

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

So How Is Taihan Textile's ROCE Trending?

Taihan Textile has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 1.5% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Taihan Textile has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

What We Can Learn From Taihan Textile's ROCE

As discussed above, Taihan Textile appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Although the company may be facing some issues elsewhere since the stock has plunged 74% in the last five years. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

Like most companies, Taihan Textile does come with some risks, and we've found 2 warning signs that you should be aware of.

While Taihan Textile 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. 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.