Returns On Capital Are Showing Encouraging Signs At SAMRYOONGLtd (KOSDAQ:014970)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, SAMRYOONGLtd (KOSDAQ:014970) looks quite promising in regards to its trends of return on capital.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on SAMRYOONGLtd is:

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

0.10 = ₩5.8b ÷ (₩105b - ₩49b) (Based on the trailing twelve months to March 2025).

So, SAMRYOONGLtd has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 4.8% generated by the Packaging industry.

Check out our latest analysis for SAMRYOONGLtd

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how SAMRYOONGLtd has performed in the past in other metrics, you can view this free graph of SAMRYOONGLtd's past earnings, revenue and cash flow.

So How Is SAMRYOONGLtd's ROCE Trending?

We're pretty happy with how the ROCE has been trending at SAMRYOONGLtd. The data shows that returns on capital have increased by 373% over the trailing five years. The company is now earning ₩0.1 per dollar of capital employed. In regards to capital employed, SAMRYOONGLtd appears to been achieving more with less, since the business is using 28% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

On a separate but related note, it's important to know that SAMRYOONGLtd has a current liabilities to total assets ratio of 47%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

Our Take On SAMRYOONGLtd's ROCE

In a nutshell, we're pleased to see that SAMRYOONGLtd has been able to generate higher returns from less capital. Since the stock has only returned 26% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you want to continue researching SAMRYOONGLtd, you might be interested to know about the 2 warning signs that our analysis has discovered.

While SAMRYOONGLtd 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.