The Return Trends At CROWNHAITAI HoldingsLtd (KRX:005740) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. With that in mind, we've noticed some promising trends at CROWNHAITAI HoldingsLtd (KRX:005740) so let's look a bit deeper.

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 CROWNHAITAI HoldingsLtd:

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

0.10 = ₩79b ÷ (₩1.2t - ₩380b) (Based on the trailing twelve months to June 2024).

Thus, CROWNHAITAI HoldingsLtd has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 7.4% it's much better.

Check out our latest analysis for CROWNHAITAI HoldingsLtd

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

What Can We Tell From CROWNHAITAI HoldingsLtd's ROCE Trend?

CROWNHAITAI HoldingsLtd's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 77% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On CROWNHAITAI HoldingsLtd's ROCE

As discussed above, CROWNHAITAI HoldingsLtd appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Given the stock has declined 46% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One more thing to note, we've identified 3 warning signs with CROWNHAITAI HoldingsLtd and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.