KODI (KOSDAQ:080530) Is Doing The Right Things To Multiply Its Share Price

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. So on that note, KODI (KOSDAQ:080530) looks quite promising in regards to its trends of return on capital.

We've discovered 3 warning signs about KODI. View them for free.

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 KODI:

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

0.026 = ₩1.5b ÷ (₩75b - ₩17b) (Based on the trailing twelve months to December 2024).

So, KODI has an ROCE of 2.6%. Ultimately, that's a low return and it under-performs the Personal Products industry average of 7.8%.

Check out our latest analysis for KODI

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating KODI's past further, check out this free graph covering KODI's past earnings, revenue and cash flow.

So How Is KODI's ROCE Trending?

Shareholders will be relieved that KODI has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 2.6% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. Because in the end, a business can only get so efficient.

What We Can Learn From KODI's ROCE

As discussed above, KODI appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Astute investors may have an opportunity here because the stock has declined 12% in the last three years. With that in mind, we believe the promising trends warrant this stock for further investigation.

KODI does have some risks though, and we've spotted 3 warning signs for KODI 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.