Is KolmarBNH (KOSDAQ:200130) Going To Multiply In Value?

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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, when we ran our eye over KolmarBNH's (KOSDAQ:200130) trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for KolmarBNH:

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

0.31 = ₩97b ÷ (₩454b - ₩137b) (Based on the trailing twelve months to June 2020).

Thus, KolmarBNH has an ROCE of 31%. In absolute terms that's a great return and it's even better than the Personal Products industry average of 6.0%.

Check out our latest analysis for KolmarBNH

Above you can see how the current ROCE for KolmarBNH compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering KolmarBNH here for free.

So How Is KolmarBNH's ROCE Trending?

We'd be pretty happy with returns on capital like KolmarBNH. The company has consistently earned 31% for the last four years, and the capital employed within the business has risen 171% in that time. Now considering ROCE is an attractive 31%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If KolmarBNH can keep this up, we'd be very optimistic about its future.

The Key Takeaway

In short, we'd argue KolmarBNH has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. Therefore it's no surprise that shareholders have earned a respectable 62% return if they held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

One more thing: We've identified 2 warning signs with KolmarBNH (at least 1 which is a bit concerning) , and understanding them would certainly be useful.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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