Capital Allocation Trends At Maniker F&G (KOSDAQ:195500) Aren't Ideal

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Maniker F&G (KOSDAQ:195500) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding 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 Maniker F&G, this is the formula:

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

0.056 = ₩3.8b ÷ (₩109b - ₩41b) (Based on the trailing twelve months to March 2024).

Therefore, Maniker F&G has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Food industry average of 7.1%.

See our latest analysis for Maniker F&G

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

What The Trend Of ROCE Can Tell Us

In terms of Maniker F&G's historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 18%, but since then they've fallen to 5.6%. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Key Takeaway

While returns have fallen for Maniker F&G in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And there could be an opportunity here if other metrics look good too, because the stock has declined 45% in the last three years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

Maniker F&G does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is concerning...

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.

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