Dongwoo Farm To Table Co (KOSDAQ:088910) Will Be Looking To Turn Around Its Returns

What underlying fundamental trends can indicate that a company might be in decline? A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. This indicates the company is producing less profit from its investments and its total assets are decreasing. On that note, looking into Dongwoo Farm To Table Co (KOSDAQ:088910), we weren't too upbeat about how things were going.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Dongwoo Farm To Table Co is:

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

0.053 = ₩12b ÷ (₩283b - ₩52b) (Based on the trailing twelve months to March 2024).

So, Dongwoo Farm To Table Co has an ROCE of 5.3%. Ultimately, that's a low return and it under-performs the Food industry average of 7.1%.

See our latest analysis for Dongwoo Farm To Table Co

Historical performance is a great place to start when researching a stock so above you can see the gauge for Dongwoo Farm To Table Co's ROCE against it's prior returns. If you're interested in investigating Dongwoo Farm To Table Co's past further, check out this free graph covering Dongwoo Farm To Table Co's past earnings, revenue and cash flow.

What Can We Tell From Dongwoo Farm To Table Co's ROCE Trend?

There is reason to be cautious about Dongwoo Farm To Table Co, given the returns are trending downwards. To be more specific, the ROCE was 6.8% five years ago, but since then it has dropped noticeably. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Dongwoo Farm To Table Co to turn into a multi-bagger.

What We Can Learn From Dongwoo Farm To Table Co's ROCE

In summary, it's unfortunate that Dongwoo Farm To Table Co is generating lower returns from the same amount of capital. It should come as no surprise then that the stock has fallen 40% over the last five years, so it looks like investors are recognizing these changes. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.

On a separate note, we've found 3 warning signs for Dongwoo Farm To Table Co you'll probably want to know about.

While Dongwoo Farm To Table Co 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.

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