We Think Cosmax (KRX:192820) Might Have The DNA Of A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Cosmax's (KRX:192820) look very promising so lets take a look.

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

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 Cosmax:

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

0.22 = ₩175b ÷ (₩2.0t - ₩1.3t) (Based on the trailing twelve months to March 2025).

Thus, Cosmax has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 7.2% earned by companies in a similar industry.

See our latest analysis for Cosmax

In the above chart we have measured Cosmax's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Cosmax for free.

How Are Returns Trending?

The trends we've noticed at Cosmax are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 22%. The amount of capital employed has increased too, by 59%. So we're very much inspired by what we're seeing at Cosmax thanks to its ability to profitably reinvest capital.

Another thing to note, Cosmax has a high ratio of current liabilities to total assets of 62%. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line

In summary, it's great to see that Cosmax 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. And a remarkable 175% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching Cosmax, you might be interested to know about the 1 warning sign that our analysis has discovered.

Cosmax is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.