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

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Sunjin Beauty ScienceLtd (KOSDAQ:086710) so let's look a bit deeper.

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. Analysts use this formula to calculate it for Sunjin Beauty ScienceLtd:

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

0.11 = ₩12b ÷ (₩142b - ₩29b) (Based on the trailing twelve months to September 2024).

So, Sunjin Beauty ScienceLtd has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 7.4% generated by the Chemicals industry.

See our latest analysis for Sunjin Beauty ScienceLtd

Above you can see how the current ROCE for Sunjin Beauty ScienceLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Sunjin Beauty ScienceLtd .

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

Sunjin Beauty ScienceLtd is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 92% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

All in all, it's terrific to see that Sunjin Beauty ScienceLtd is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 45% to shareholders over the last three years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 3 warning signs for Sunjin Beauty ScienceLtd you'll probably want to 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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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.