Pulmuone (KRX:017810) Might Have The Makings Of A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Speaking of which, we noticed some great changes in Pulmuone's (KRX:017810) returns on capital, so let's have a look.

We've discovered 2 warning signs about Pulmuone. View them for free.

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 Pulmuone is:

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

0.077 = ₩92b ÷ (₩2.3t - ₩1.1t) (Based on the trailing twelve months to December 2024).

So, Pulmuone has an ROCE of 7.7%. On its own, that's a low figure but it's around the 7.5% average generated by the Food industry.

View our latest analysis for Pulmuone

In the above chart we have measured Pulmuone's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Pulmuone .

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 7.7%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 37%. So we're very much inspired by what we're seeing at Pulmuone thanks to its ability to profitably reinvest capital.

On a separate but related note, it's important to know that Pulmuone has a current liabilities to total assets ratio of 49%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line On Pulmuone's ROCE

To sum it up, Pulmuone has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 52% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Pulmuone can keep these trends up, it could have a bright future ahead.

On a final note, we found 2 warning signs for Pulmuone (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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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.