Return Trends At Samyang Holdings (KRX:000070) Aren't Appealing

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Samyang Holdings (KRX:000070), it didn't seem to tick all of these boxes.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Samyang Holdings, this is the formula:

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

0.036 = ₩113b ÷ (₩3.8t - ₩656b) (Based on the trailing twelve months to September 2020).

Thus, Samyang Holdings has an ROCE of 3.6%. Ultimately, that's a low return and it under-performs the Food industry average of 6.9%.

See our latest analysis for Samyang Holdings

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 Samyang Holdings, check out these free graphs here.

How Are Returns Trending?

In terms of Samyang Holdings' historical ROCE trend, it doesn't exactly demand attention. The company has employed 25% more capital in the last five years, and the returns on that capital have remained stable at 3.6%. 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.

In Conclusion...

In summary, Samyang Holdings has simply been reinvesting capital and generating the same low rate of return as before. And in the last five years, the stock has given away 34% so the market doesn't look too hopeful on these trends strengthening any time soon. 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 Samyang Holdings (1 is a bit unpleasant) 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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