Samyang Foods (KRX:003230) Is Achieving High Returns On Its Capital

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Samyang Foods (KRX:003230) we really liked what we saw.

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Understanding 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. Analysts use this formula to calculate it for Samyang Foods:

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

0.31 = ₩345b ÷ (₩1.6t - ₩492b) (Based on the trailing twelve months to December 2024).

Thus, Samyang Foods has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 7.5% earned by companies in a similar industry.

Check out our latest analysis for Samyang Foods

Above you can see how the current ROCE for Samyang Foods compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Samyang Foods .

What Does the ROCE Trend For Samyang Foods Tell Us?

We like the trends that we're seeing from Samyang Foods. The data shows that returns on capital have increased substantially over the last five years to 31%. The amount of capital employed has increased too, by 244%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Samyang Foods' ROCE

To sum it up, Samyang Foods has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 748% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing to note, we've identified 1 warning sign with Samyang Foods and understanding it should be part of your investment process.

Samyang Foods is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.