DS DANSUK's (KRX:017860) Returns Have Hit A Wall

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. However, after investigating DS DANSUK (KRX:017860), we don't think it's current trends fit the mold of a multi-bagger.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for DS DANSUK, this is the formula:

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

0.06 = ₩26b ÷ (₩724b - ₩288b) (Based on the trailing twelve months to September 2024).

Therefore, DS DANSUK has an ROCE of 6.0%. On its own that's a low return, but compared to the average of 3.0% generated by the Oil and Gas industry, it's much better.

View our latest analysis for DS DANSUK

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

What Does the ROCE Trend For DS DANSUK Tell Us?

There are better returns on capital out there than what we're seeing at DS DANSUK. The company has consistently earned 6.0% for the last five years, and the capital employed within the business has risen 172% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 40% of total assets, is good to see from a business owner's perspective. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Bottom Line On DS DANSUK's ROCE

In conclusion, DS DANSUK has been investing more capital into the business, but returns on that capital haven't increased. And investors may be expecting the fundamentals to get a lot worse because the stock has crashed 73% over the last year. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

One more thing: We've identified 4 warning signs with DS DANSUK (at least 2 which shouldn't be ignored) , and understanding these would certainly be useful.

While DS DANSUK 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.