Returns On Capital Are Showing Encouraging Signs At Jeonjinbio (KOSDAQ:110020)

There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Jeonjinbio's (KOSDAQ:110020) returns on capital, so let's have a look.

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Return On Capital Employed (ROCE): What Is It?

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 Jeonjinbio, this is the formula:

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

0.032 = ₩562m ÷ (₩18b - ₩866m) (Based on the trailing twelve months to March 2025).

Therefore, Jeonjinbio has an ROCE of 3.2%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 7.9%.

See our latest analysis for Jeonjinbio

Historical performance is a great place to start when researching a stock so above you can see the gauge for Jeonjinbio's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Jeonjinbio.

What Does the ROCE Trend For Jeonjinbio Tell Us?

We're delighted to see that Jeonjinbio is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 3.2% on its capital. In addition to that, Jeonjinbio is employing 224% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

Our Take On Jeonjinbio's ROCE

To the delight of most shareholders, Jeonjinbio has now broken into profitability. Given the stock has declined 44% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

Jeonjinbio does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those don't sit too well with us...

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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.