WONIK MaterialsLtd (KOSDAQ:104830) Hasn't Managed To Accelerate Its Returns

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of WONIK MaterialsLtd (KOSDAQ:104830) looks decent, right now, so lets see what the trend of returns can tell us.

What is 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. The formula for this calculation on WONIK MaterialsLtd is:

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

0.13 = ₩46b ÷ (₩400b - ₩59b) (Based on the trailing twelve months to December 2020).

So, WONIK MaterialsLtd has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 7.9% generated by the Chemicals industry.

View our latest analysis for WONIK MaterialsLtd

Above you can see how the current ROCE for WONIK MaterialsLtd 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 report on analyst forecasts for the company.

The Trend Of ROCE

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 64% in that time. 13% is a pretty standard return, and it provides some comfort knowing that WONIK MaterialsLtd has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

To sum it up, WONIK MaterialsLtd has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 36% return to shareholders who held over that period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

While WONIK MaterialsLtd doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.

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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