Returns On Capital At Wonik (KOSDAQ:032940) Paint A Concerning Picture

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. Although, when we looked at Wonik (KOSDAQ:032940), it didn't seem to tick all of these boxes.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Wonik is:

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

0.026 = ₩8.4b ÷ (₩373b - ₩49b) (Based on the trailing twelve months to March 2025).

Thus, Wonik has an ROCE of 2.6%. Ultimately, that's a low return and it under-performs the Healthcare industry average of 9.5%.

Check out our latest analysis for Wonik

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

What Does the ROCE Trend For Wonik Tell Us?

In terms of Wonik's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 2.6% from 6.0% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

On a side note, Wonik has done well to pay down its current liabilities to 13% of total assets. So we could link some of this to the decrease in ROCE. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

The Bottom Line On Wonik's ROCE

In summary, Wonik is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Since the stock has gained an impressive 82% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you'd like to know more about Wonik, we've spotted 3 warning signs, and 1 of them is significant.

While Wonik may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.