Will the Promising Trends At Suheung (KRX:008490) Continue?

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in Suheung's (KRX:008490) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

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. To calculate this metric for Suheung, this is the formula:

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

0.11 = ₩61b ÷ (₩767b - ₩219b) (Based on the trailing twelve months to June 2020).

Thus, Suheung has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Medical Equipment industry average of 13%.

Check out our latest analysis for Suheung

In the above chart we have measured Suheung's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Suheung.

What Does the ROCE Trend For Suheung Tell Us?

We like the trends that we're seeing from Suheung. Over the last five years, returns on capital employed have risen substantially to 11%. The amount of capital employed has increased too, by 53%. 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 On Suheung's ROCE

All in all, it's terrific to see that Suheung is reaping the rewards from prior investments and is growing its capital base. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 20% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you'd like to know about the risks facing Suheung, we've discovered 1 warning sign that you should be aware of.

While Suheung 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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