The Trends At Daebongls.Co.Ltd (KOSDAQ:078140) That You Should Know About

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Daebongls.Co.Ltd (KOSDAQ:078140), it didn't seem to tick all of these boxes.

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 Daebongls.Co.Ltd, this is the formula:

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

0.094 = ₩9.2b ÷ (₩110b - ₩12b) (Based on the trailing twelve months to June 2020).

So, Daebongls.Co.Ltd has an ROCE of 9.4%. On its own, that's a low figure but it's around the 8.1% average generated by the Chemicals industry.

Check out our latest analysis for Daebongls.Co.Ltd

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 Daebongls.Co.Ltd, check out these free graphs here.

What Can We Tell From Daebongls.Co.Ltd's ROCE Trend?

When we looked at the ROCE trend at Daebongls.Co.Ltd, we didn't gain much confidence. Around five years ago the returns on capital were 13%, but since then they've fallen to 9.4%. However it looks like Daebongls.Co.Ltd 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's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line

To conclude, we've found that Daebongls.Co.Ltd is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 7.1% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Daebongls.Co.Ltd does have some risks, we noticed 2 warning signs (and 1 which is potentially serious) we think you should know about.

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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