We Like These Underlying Return On Capital Trends At Cosmecca Korea (KOSDAQ:241710)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. 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 looked at Cosmecca Korea (KOSDAQ:241710) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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 Cosmecca Korea:

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

0.14 = ₩38b ÷ (₩423b - ₩153b) (Based on the trailing twelve months to September 2023).

So, Cosmecca Korea has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Personal Products industry average of 5.8% it's much better.

See our latest analysis for Cosmecca Korea

In the above chart we have measured Cosmecca Korea's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Cosmecca Korea .

What Can We Tell From Cosmecca Korea's ROCE Trend?

Investors would be pleased with what's happening at Cosmecca Korea. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. The amount of capital employed has increased too, by 21%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Cosmecca Korea's ROCE

To sum it up, Cosmecca Korea has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 59% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Cosmecca Korea can keep these trends up, it could have a bright future ahead.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for A241710 that compares the share price and estimated value.

While Cosmecca Korea 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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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.