In the FLTD's (KRX:014990) Returns On Capital Are Heading Higher

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. Speaking of which, we noticed some great changes in In the FLTD's (KRX:014990) returns on capital, so let's have 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 In the FLTD, this is the formula:

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

0.02 = ₩1.4b ÷ (₩121b - ₩50b) (Based on the trailing twelve months to June 2024).

Thus, In the FLTD has an ROCE of 2.0%. In absolute terms, that's a low return and it also under-performs the Luxury industry average of 7.3%.

Check out our latest analysis for In the FLTD

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating In the FLTD's past further, check out this free graph covering In the FLTD's past earnings, revenue and cash flow.

What Can We Tell From In the FLTD's ROCE Trend?

We're delighted to see that In the FLTD is reaping rewards from its investments and has now broken into profitability. The company now earns 2.0% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by In the FLTD 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. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

On a side note, In the FLTD's current liabilities are still rather high at 41% 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. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

In Conclusion...

In summary, we're delighted to see that In the FLTD has been able to increase efficiencies and earn higher rates of return on the same amount of capital. However the stock is down a substantial 78% in the last five years so there could be other areas of the business hurting its prospects. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

On a final note, we found 4 warning signs for In the FLTD (2 are a bit unpleasant) you should be aware of.

While In the FLTD may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.