If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating OPTUS Pharmaceutical (KOSDAQ:131030), we don't think it's current trends fit the mold of a multi-bagger.
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 OPTUS Pharmaceutical:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.056 = ₩8.3b ÷ (₩172b - ₩23b) (Based on the trailing twelve months to June 2025).
So, OPTUS Pharmaceutical has an ROCE of 5.6%. In absolute terms, that's a low return and it also under-performs the Medical Equipment industry average of 7.8%.
Check out our latest analysis for OPTUS Pharmaceutical
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating OPTUS Pharmaceutical's past further, check out this free graph covering OPTUS Pharmaceutical's past earnings, revenue and cash flow.
The Trend Of ROCE
When we looked at the ROCE trend at OPTUS Pharmaceutical, we didn't gain much confidence. Around five years ago the returns on capital were 15%, but since then they've fallen to 5.6%. 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 may take some time before the company starts to see any change in earnings from these investments.
The Key Takeaway
In summary, OPTUS Pharmaceutical is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.
On a final note, we found 4 warning signs for OPTUS Pharmaceutical (2 make us uncomfortable) you should be aware of.
While OPTUS Pharmaceutical 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.