The Returns At Pungguk Ethanol Industrial (KOSDAQ:023900) Provide Us With Signs Of What's To Come

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Pungguk Ethanol Industrial (KOSDAQ:023900), we don't think it's current trends fit the mold of a multi-bagger.

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. The formula for this calculation on Pungguk Ethanol Industrial is:

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

0.064 = ₩11b ÷ (₩185b - ₩21b) (Based on the trailing twelve months to September 2020).

Thus, Pungguk Ethanol Industrial has an ROCE of 6.4%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 8.2%.

View our latest analysis for Pungguk Ethanol Industrial

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 want to delve into the historical earnings, revenue and cash flow of Pungguk Ethanol Industrial, check out these free graphs here.

The Trend Of ROCE

In terms of Pungguk Ethanol Industrial's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 6.4% and the business has deployed 36% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On Pungguk Ethanol Industrial's ROCE

Long story short, while Pungguk Ethanol Industrial has been reinvesting its capital, the returns that it's generating haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 261% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you'd like to know more about Pungguk Ethanol Industrial, we've spotted 2 warning signs, and 1 of them is concerning.

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This article by Simply Wall St is general in nature. 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.
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