Does Uno&Company.Ltd (KOSDAQ:114630) Have The Makings Of A Multi-Bagger?

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Uno&Company.Ltd (KOSDAQ:114630) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Uno&Company.Ltd:

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

0.057 = ₩4.2b ÷ (₩81b - ₩6.4b) (Based on the trailing twelve months to September 2020).

Therefore, Uno&Company.Ltd has an ROCE of 5.7%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 8.0%.

See our latest analysis for Uno&Company.Ltd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Uno&Company.Ltd's ROCE against it's prior returns. If you'd like to look at how Uno&Company.Ltd has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Uno&Company.Ltd Tell Us?

Uno&Company.Ltd's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 29% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line

In summary, we're delighted to see that Uno&Company.Ltd has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has only returned 8.8% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Uno&Company.Ltd does have some risks, we noticed 3 warning signs (and 1 which is concerning) we think you should know about.

While Uno&Company.Ltd may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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