Returns On Capital At SAMPYO Cement (KOSDAQ:038500) Paint An Interesting Picture

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. In light of that, when we looked at SAMPYO Cement (KOSDAQ:038500) and its ROCE trend, we weren't exactly thrilled.

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. The formula for this calculation on SAMPYO Cement is:

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

0.043 = ₩44b ÷ (₩1.3t - ₩263b) (Based on the trailing twelve months to September 2020).

So, SAMPYO Cement has an ROCE of 4.3%. On its own that's a low return, but compared to the average of 3.4% generated by the Basic Materials industry, it's much better.

Check out our latest analysis for SAMPYO Cement

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 want to delve into the historical earnings, revenue and cash flow of SAMPYO Cement, check out these free graphs here.

What Does the ROCE Trend For SAMPYO Cement Tell Us?

Things have been pretty stable at SAMPYO Cement, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if SAMPYO Cement doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

We can conclude that in regards to SAMPYO Cement's returns on capital employed and the trends, there isn't much change to report on. Unsurprisingly, the stock has only gained 27% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

SAMPYO Cement does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

While SAMPYO Cement isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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