SAMRYOONGLtd (KOSDAQ:014970) Shareholders Will Want The ROCE Trajectory To Continue

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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 SAMRYOONGLtd (KOSDAQ:014970) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for SAMRYOONGLtd, this is the formula:

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

0.046 = ₩3.0b ÷ (₩109b - ₩43b) (Based on the trailing twelve months to June 2024).

So, SAMRYOONGLtd has an ROCE of 4.6%. Ultimately, that's a low return and it under-performs the Packaging industry average of 6.2%.

See our latest analysis for SAMRYOONGLtd

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

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 80% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that SAMRYOONGLtd has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Given the stock has declined 63% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

SAMRYOONGLtd does have some risks though, and we've spotted 2 warning signs for SAMRYOONGLtd that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.