WON TECHLtd (KOSDAQ:336570) Could Become A Multi-Bagger

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in WON TECHLtd's (KOSDAQ:336570) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for WON TECHLtd:

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

0.46 = ₩46b ÷ (₩153b - ₩53b) (Based on the trailing twelve months to December 2023).

So, WON TECHLtd has an ROCE of 46%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

View our latest analysis for WON TECHLtd

In the above chart we have measured WON TECHLtd'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 WON TECHLtd .

What Does the ROCE Trend For WON TECHLtd Tell Us?

We like the trends that we're seeing from WON TECHLtd. Over the last two years, returns on capital employed have risen substantially to 46%. Basically the business is earning more per dollar of capital invested and in addition to that, 220% more capital is being employed now too. So we're very much inspired by what we're seeing at WON TECHLtd thanks to its ability to profitably reinvest capital.

In Conclusion...

To sum it up, WON TECHLtd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 419% total return over the last three years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing: We've identified 2 warning signs with WON TECHLtd (at least 1 which shouldn't be ignored) , and understanding these would certainly be useful.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.