Shinjin SmLtd (KOSDAQ:138070) Has More To Do To Multiply In Value Going Forward

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think Shinjin SmLtd (KOSDAQ:138070) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

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 Shinjin SmLtd:

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

0.037 = ₩3.2b ÷ (₩108b - ₩23b) (Based on the trailing twelve months to March 2024).

Thus, Shinjin SmLtd has an ROCE of 3.7%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 7.1%.

See our latest analysis for Shinjin SmLtd

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

What Does the ROCE Trend For Shinjin SmLtd Tell Us?

Over the past five years, Shinjin SmLtd's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Shinjin SmLtd to be a multi-bagger going forward.

Our Take On Shinjin SmLtd's ROCE

We can conclude that in regards to Shinjin SmLtd's returns on capital employed and the trends, there isn't much change to report on. And investors may be recognizing these trends since the stock has only returned a total of 35% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

One more thing, we've spotted 3 warning signs facing Shinjin SmLtd that you might find interesting.

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.