Does Korea Alcohol Industrial (KOSDAQ:017890) Have The Makings Of A Multi-Bagger?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. With that in mind, we've noticed some promising trends at Korea Alcohol Industrial (KOSDAQ:017890) so let's look a bit deeper.

Understanding 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 Korea Alcohol Industrial, this is the formula:

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

0.12 = ₩54b ÷ (₩489b - ₩59b) (Based on the trailing twelve months to September 2020).

Therefore, Korea Alcohol Industrial has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 8.0% it's much better.

See our latest analysis for Korea Alcohol Industrial

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 Korea Alcohol Industrial has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Korea Alcohol Industrial's ROCE Trending?

We like the trends that we're seeing from Korea Alcohol Industrial. Over the last five years, returns on capital employed have risen substantially to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 87%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Korea Alcohol Industrial's ROCE

All in all, it's terrific to see that Korea Alcohol Industrial is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 94% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

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. 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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