We Think BAIKSAN Co (KRX:035150) Might Have The DNA Of A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. With that in mind, the ROCE of BAIKSAN Co (KRX:035150) looks great, so lets see what the trend can tell us.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for BAIKSAN Co:

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

0.26 = ₩77b ÷ (₩458b - ₩162b) (Based on the trailing twelve months to December 2024).

Therefore, BAIKSAN Co has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 6.7% earned by companies in a similar industry.

See our latest analysis for BAIKSAN Co

In the above chart we have measured BAIKSAN Co's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering BAIKSAN Co for free.

So How Is BAIKSAN Co's ROCE Trending?

BAIKSAN Co is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 26%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 70%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

One more thing to note, BAIKSAN Co has decreased current liabilities to 35% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

The Bottom Line

To sum it up, BAIKSAN Co has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 193% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

While BAIKSAN Co looks impressive, no company is worth an infinite price. The intrinsic value infographic for A035150 helps visualize whether it is currently trading for a fair price.

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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.