Investors Met With Slowing Returns on Capital At Value Added Technology (KOSDAQ:043150)

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. 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. 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, the ROCE of Value Added Technology (KOSDAQ:043150) looks decent, right now, so lets see what the trend of returns can tell us.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Value Added Technology:

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

0.12 = ₩61b ÷ (₩628b - ₩116b) (Based on the trailing twelve months to June 2024).

Thus, Value Added Technology has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.3% generated by the Medical Equipment industry.

Check out our latest analysis for Value Added Technology

Above you can see how the current ROCE for Value Added Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Value Added Technology for free.

So How Is Value Added Technology's ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has employed 76% more capital in the last five years, and the returns on that capital have remained stable at 12%. Since 12% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Value Added Technology's ROCE

In the end, Value Added Technology has proven its ability to adequately reinvest capital at good rates of return. Yet over the last five years the stock has declined 26%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

Value Added Technology could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for A043150 on our platform quite valuable.

While Value Added Technology isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.