The Trend Of High Returns At T&L (KOSDAQ:340570) Has Us Very Interested

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 T&L's (KOSDAQ:340570) returns on capital, so let's have a look.

Understanding 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 T&L is:

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

0.28 = ₩47b ÷ (₩184b - ₩19b) (Based on the trailing twelve months to September 2024).

Therefore, T&L has an ROCE of 28%. That's a fantastic return and not only that, it outpaces the average of 9.0% earned by companies in a similar industry.

See our latest analysis for T&L

Above you can see how the current ROCE for T&L compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for T&L .

What Does the ROCE Trend For T&L Tell Us?

T&L is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 28%. Basically the business is earning more per dollar of capital invested and in addition to that, 355% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that T&L is reaping the rewards from prior investments and is growing its capital base. And a remarkable 120% 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.

While T&L looks impressive, no company is worth an infinite price. The intrinsic value infographic for A340570 helps visualize whether it is currently trading for a fair price.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.