Hanmi Science's (KRX:008930) Returns On Capital Are Heading Higher

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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 on that note, Hanmi Science (KRX:008930) looks quite promising in regards to its trends of return on capital.

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What Is 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. Analysts use this formula to calculate it for Hanmi Science:

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

0.045 = ₩42b ÷ (₩1.4t - ₩454b) (Based on the trailing twelve months to June 2025).

So, Hanmi Science has an ROCE of 4.5%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 9.8%.

View our latest analysis for Hanmi Science

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hanmi Science's ROCE against it's prior returns. If you're interested in investigating Hanmi Science's past further, check out this free graph covering Hanmi Science's past earnings, revenue and cash flow.

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 4.5%. Basically the business is earning more per dollar of capital invested and in addition to that, 39% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

All in all, it's terrific to see that Hanmi Science is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 33% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One more thing, we've spotted 2 warning signs facing Hanmi Science that you might find interesting.

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.