Hankukpackage's (KOSDAQ:037230) Returns Have Hit A Wall

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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 briefly looking over the numbers, we don't think Hankukpackage (KOSDAQ:037230) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

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 Hankukpackage, this is the formula:

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

0.059 = ₩7.3b ÷ (₩221b - ₩98b) (Based on the trailing twelve months to March 2025).

Therefore, Hankukpackage has an ROCE of 5.9%. On its own that's a low return, but compared to the average of 4.8% generated by the Packaging industry, it's much better.

See our latest analysis for Hankukpackage

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

The Trend Of ROCE

There are better returns on capital out there than what we're seeing at Hankukpackage. The company has consistently earned 5.9% for the last five years, and the capital employed within the business has risen 155% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

On another note, while the change in ROCE trend might not scream for attention, it's interesting that the current liabilities have actually gone up over the last five years. This is intriguing because if current liabilities hadn't increased to 44% of total assets, this reported ROCE would probably be less than5.9% because total capital employed would be higher.The 5.9% ROCE could be even lower if current liabilities weren't 44% of total assets, because the the formula would show a larger base of total capital employed. Additionally, this high level of current liabilities isn't ideal because it means the company's suppliers (or short-term creditors) are effectively funding a large portion of the business.

In Conclusion...

Long story short, while Hankukpackage has been reinvesting its capital, the returns that it's generating haven't increased. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. 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.

One final note, you should learn about the 5 warning signs we've spotted with Hankukpackage (including 3 which are a bit unpleasant) .

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.