Visang Education (KRX:100220) Could Be Struggling To Allocate Capital

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Visang Education (KRX:100220) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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What Is Return On Capital Employed (ROCE)?

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 Visang Education:

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

0.033 = ₩9.4b ÷ (₩388b - ₩107b) (Based on the trailing twelve months to December 2024).

Therefore, Visang Education has an ROCE of 3.3%. Ultimately, that's a low return and it under-performs the Consumer Services industry average of 13%.

See our latest analysis for Visang Education

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

The Trend Of ROCE

When we looked at the ROCE trend at Visang Education, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 3.3% from 10% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On Visang Education's ROCE

To conclude, we've found that Visang Education is reinvesting in the business, but returns have been falling. Since the stock has declined 22% over the last five years, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

On a final note, we found 3 warning signs for Visang Education (2 are a bit concerning) you should be aware of.

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.