CXI Healthcare Technology Group (KOSDAQ:900120) Is Experiencing Growth In Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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 looked at CXI Healthcare Technology Group (KOSDAQ:900120) and its trend of ROCE, we really liked what we saw.

What Is 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. To calculate this metric for CXI Healthcare Technology Group, this is the formula:

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

0.037 = ₩17b ÷ (₩451b - ₩2.6b) (Based on the trailing twelve months to March 2024).

Thus, CXI Healthcare Technology Group has an ROCE of 3.7%. Ultimately, that's a low return and it under-performs the Personal Products industry average of 8.5%.

See our latest analysis for CXI Healthcare Technology Group

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

How Are Returns Trending?

We're delighted to see that CXI Healthcare Technology Group is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 3.7% on its capital. While returns have increased, the amount of capital employed by CXI Healthcare Technology Group has remained flat over the period. 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.

Our Take On CXI Healthcare Technology Group's ROCE

To bring it all together, CXI Healthcare Technology Group has done well to increase the returns it's generating from its capital employed. Although the company may be facing some issues elsewhere since the stock has plunged 75% in the last five years. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

On a separate note, we've found 3 warning signs for CXI Healthcare Technology Group you'll probably want to know about.

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.

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