Is There More Growth In Store For Sambo Corrugated Board's (KOSDAQ:023600) Returns On Capital?

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Sambo Corrugated Board (KOSDAQ:023600) and its trend of ROCE, we really liked what we saw.

What is Return On Capital Employed (ROCE)?

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. To calculate this metric for Sambo Corrugated Board, this is the formula:

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

0.082 = ₩41b ÷ (₩566b - ₩69b) (Based on the trailing twelve months to September 2020).

Thus, Sambo Corrugated Board has an ROCE of 8.2%. In absolute terms, that's a low return, but it's much better than the Packaging industry average of 5.7%.

View our latest analysis for Sambo Corrugated Board

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sambo Corrugated Board's ROCE against it's prior returns. If you'd like to look at how Sambo Corrugated Board has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Sambo Corrugated Board's ROCE growth is quite impressive. 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 164% 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

In summary, we're delighted to see that Sambo Corrugated Board has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a solid 90% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you'd like to know about the risks facing Sambo Corrugated Board, we've discovered 2 warning signs that you should be aware of.

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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