DukSan NeoluxLtd (KOSDAQ:213420) Is Looking To Continue Growing Its Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, DukSan NeoluxLtd (KOSDAQ:213420) looks quite promising in regards to its trends of return on capital.

Understanding 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. The formula for this calculation on DukSan NeoluxLtd is:

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

0.20 = ₩40b ÷ (₩221b - ₩20b) (Based on the trailing twelve months to December 2020).

Therefore, DukSan NeoluxLtd has an ROCE of 20%. On its own, that's a standard return, however it's much better than the 7.9% generated by the Chemicals industry.

Check out our latest analysis for DukSan NeoluxLtd

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

What Can We Tell From DukSan NeoluxLtd's ROCE Trend?

The trends we've noticed at DukSan NeoluxLtd are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 20%. Basically the business is earning more per dollar of capital invested and in addition to that, 86% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

In Conclusion...

All in all, it's terrific to see that DukSan NeoluxLtd is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, DukSan NeoluxLtd does come with some risks, and we've found 1 warning sign that you should be aware of.

While DukSan NeoluxLtd 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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