We Like These Underlying Return On Capital Trends At Wonbiogen (KOSDAQ:307280)

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Wonbiogen (KOSDAQ:307280) and its trend of ROCE, we really liked what we saw.

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. The formula for this calculation on Wonbiogen is:

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

0.18 = ₩6.4b ÷ (₩44b - ₩8.9b) (Based on the trailing twelve months to June 2024).

Thus, Wonbiogen has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 9.3% it's much better.

View our latest analysis for Wonbiogen

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

So How Is Wonbiogen's ROCE Trending?

We like the trends that we're seeing from Wonbiogen. The numbers show that in the last three years, the returns generated on capital employed have grown considerably to 18%. Basically the business is earning more per dollar of capital invested and in addition to that, 41% more capital is being employed now too. So we're very much inspired by what we're seeing at Wonbiogen thanks to its ability to profitably reinvest capital.

The Bottom Line

In summary, it's great to see that Wonbiogen can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And since the stock has fallen 38% over the last three years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Wonbiogen does have some risks though, and we've spotted 1 warning sign for Wonbiogen that you might be interested in.

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.