Return Trends At Bokwang Industry (KOSDAQ:225530) Aren't Appealing

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. However, after briefly looking over the numbers, we don't think Bokwang Industry (KOSDAQ:225530) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What Is 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 Bokwang Industry:

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

0.081 = ₩11b ÷ (₩178b - ₩39b) (Based on the trailing twelve months to September 2024).

Therefore, Bokwang Industry has an ROCE of 8.1%. Even though it's in line with the industry average of 7.9%, it's still a low return by itself.

Check out our latest analysis for Bokwang Industry

Historical performance is a great place to start when researching a stock so above you can see the gauge for Bokwang Industry'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 Bokwang Industry.

What Does the ROCE Trend For Bokwang Industry Tell Us?

The returns on capital haven't changed much for Bokwang Industry in recent years. The company has consistently earned 8.1% for the last four years, and the capital employed within the business has risen 33% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line On Bokwang Industry's ROCE

Long story short, while Bokwang Industry has been reinvesting its capital, the returns that it's generating haven't increased. And with the stock having returned a mere 14% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Bokwang Industry (of which 1 is concerning!) that you should know about.

While Bokwang Industry isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.