We Like These Underlying Return On Capital Trends At CLIO CosmeticsLtd (KOSDAQ:237880)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at CLIO CosmeticsLtd (KOSDAQ:237880) and its trend of ROCE, we really liked what we saw.

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 CLIO CosmeticsLtd:

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

0.15 = ₩36b ÷ (₩305b - ₩59b) (Based on the trailing twelve months to September 2024).

So, CLIO CosmeticsLtd has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Personal Products industry average of 7.8% it's much better.

View our latest analysis for CLIO CosmeticsLtd

In the above chart we have measured CLIO CosmeticsLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for CLIO CosmeticsLtd .

What The Trend Of ROCE Can Tell Us

Investors would be pleased with what's happening at CLIO CosmeticsLtd. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 49%. So we're very much inspired by what we're seeing at CLIO CosmeticsLtd thanks to its ability to profitably reinvest capital.

The Bottom Line

In summary, it's great to see that CLIO CosmeticsLtd can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 28% to shareholders. So with that in mind, we think the stock deserves further research.

CLIO CosmeticsLtd does have some risks though, and we've spotted 1 warning sign for CLIO CosmeticsLtd 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.