Returns On Capital Are Showing Encouraging Signs At BYC (KRX:001460)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at BYC (KRX:001460) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for BYC:

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

0.044 = ₩26b ÷ (₩678b - ₩100b) (Based on the trailing twelve months to September 2023).

Therefore, BYC has an ROCE of 4.4%. Ultimately, that's a low return and it under-performs the Luxury industry average of 9.0%.

See our latest analysis for BYC

Historical performance is a great place to start when researching a stock so above you can see the gauge for BYC's ROCE against it's prior returns. If you'd like to look at how BYC has performed in the past in other metrics, you can view this free graph of BYC's past earnings, revenue and cash flow.

What Does the ROCE Trend For BYC Tell Us?

While there are companies with higher returns on capital out there, we still find the trend at BYC promising. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 45% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To sum it up, BYC is collecting higher returns from the same amount of capital, and that's impressive. And a remarkable 114% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching BYC, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.