Investors Could Be Concerned With Korea Alcohol Industrial's (KOSDAQ:017890) Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating Korea Alcohol Industrial (KOSDAQ:017890), we don't think it's current trends fit the mold of a multi-bagger.

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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. 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)

0.046 = ₩29b ÷ (₩674b - ₩48b) (Based on the trailing twelve months to June 2025).

Thus, Korea Alcohol Industrial has an ROCE of 4.6%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 7.0%.

See our latest analysis for Korea Alcohol Industrial

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

What The Trend Of ROCE Can Tell Us

When we looked at the ROCE trend at Korea Alcohol Industrial, we didn't gain much confidence. To be more specific, ROCE has fallen from 11% over the last five years. However it looks like Korea Alcohol Industrial might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On Korea Alcohol Industrial's ROCE

To conclude, we've found that Korea Alcohol Industrial is reinvesting in the business, but returns have been falling. Since the stock has declined 21% over the last five years, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

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

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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.