Sunjin Beauty ScienceLtd (KOSDAQ:086710) Shareholders Will Want The ROCE Trajectory To Continue

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Speaking of which, we noticed some great changes in Sunjin Beauty ScienceLtd's (KOSDAQ:086710) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

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 Sunjin Beauty ScienceLtd, this is the formula:

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

0.097 = ₩9.8b ÷ (₩130b - ₩29b) (Based on the trailing twelve months to March 2024).

So, Sunjin Beauty ScienceLtd has an ROCE of 9.7%. In absolute terms, that's a low return, but it's much better than the Chemicals industry average of 6.6%.

Check out our latest analysis for Sunjin Beauty ScienceLtd

In the above chart we have measured Sunjin Beauty ScienceLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Sunjin Beauty ScienceLtd .

What Does the ROCE Trend For Sunjin Beauty ScienceLtd Tell Us?

Sunjin Beauty ScienceLtd's ROCE growth is quite impressive. The figures show that over the last three years, ROCE has grown 363% whilst employing roughly the same amount of capital. 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. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Sunjin Beauty ScienceLtd's ROCE

To bring it all together, Sunjin Beauty ScienceLtd has done well to increase the returns it's generating from its capital employed. And with a respectable 88% awarded to those who held the stock over the last three years, you could argue that these developments are starting to get the attention they deserve. 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.

One more thing to note, we've identified 2 warning signs with Sunjin Beauty ScienceLtd and understanding them should be part of your investment process.

While Sunjin Beauty ScienceLtd 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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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.