Will The ROCE Trend At DukSan NeoluxLtd (KOSDAQ:213420) Continue?

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in DukSan NeoluxLtd's (KOSDAQ:213420) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for DukSan NeoluxLtd, this is the formula:

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

0.18 = ₩35b ÷ (₩209b - ₩17b) (Based on the trailing twelve months to September 2020).

So, DukSan NeoluxLtd has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 8.0% it's much better.

See 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 four years, the returns generated on capital employed have grown considerably to 18%. The amount of capital employed has increased too, by 73%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

In summary, it's great to see that DukSan NeoluxLtd can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 114% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

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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