Investors Will Want Seung Il's (KOSDAQ:049830) Growth In ROCE To Persist

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Seung Il (KOSDAQ:049830) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Seung Il:

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

0.011 = ₩1.7b ÷ (₩176b - ₩27b) (Based on the trailing twelve months to June 2024).

So, Seung Il has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Packaging industry average of 5.5%.

Check out our latest analysis for Seung Il

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

The Trend Of ROCE

Shareholders will be relieved that Seung Il has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 1.1% on its capital. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Bottom Line On Seung Il's ROCE

To sum it up, Seung Il is collecting higher returns from the same amount of capital, and that's impressive. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Like most companies, Seung Il does come with some risks, and we've found 2 warning signs that you should be aware of.

While Seung Il may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.