Returns At OpenknowlLtd (KOSDAQ:440320) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, OpenknowlLtd (KOSDAQ:440320) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on OpenknowlLtd is:

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

0.023 = ₩972m ÷ (₩50b - ₩8.4b) (Based on the trailing twelve months to June 2024).

So, OpenknowlLtd has an ROCE of 2.3%. Ultimately, that's a low return and it under-performs the Consumer Services industry average of 16%.

Check out our latest analysis for OpenknowlLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for OpenknowlLtd's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of OpenknowlLtd.

The Trend Of ROCE

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. The figures show that over the last one year, ROCE has grown 512% whilst employing roughly the same amount of capital. 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 Key Takeaway

To sum it up, OpenknowlLtd is collecting higher returns from the same amount of capital, and that's impressive. Given the stock has declined 38% in the last year, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

OpenknowlLtd does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is potentially serious...

While OpenknowlLtd 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.