Has GREEN CROSS WellBeing (KOSDAQ:234690) Got What It Takes To Become A Multi-Bagger?

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at GREEN CROSS WellBeing (KOSDAQ:234690) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for GREEN CROSS WellBeing:

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

0.035 = ₩3.3b ÷ (₩112b - ₩18b) (Based on the trailing twelve months to September 2020).

So, GREEN CROSS WellBeing has an ROCE of 3.5%. In absolute terms, that's a low return and it also under-performs the Personal Products industry average of 6.8%.

View our latest analysis for GREEN CROSS WellBeing

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

The Trend Of ROCE

Things have been pretty stable at GREEN CROSS WellBeing, with its capital employed and returns on that capital staying somewhat the same for the last . This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect GREEN CROSS WellBeing to be a multi-bagger going forward.

Our Take On GREEN CROSS WellBeing's ROCE

In a nutshell, GREEN CROSS WellBeing has been trudging along with the same returns from the same amount of capital over the last . Although the market must be expecting these trends to improve because the stock has gained 54% over the last year. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One more thing to note, we've identified 3 warning signs with GREEN CROSS WellBeing and understanding these should be part of your investment process.

While GREEN CROSS WellBeing 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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