The Returns At Pum-Tech Korea (KOSDAQ:251970) Aren't Growing

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. That's why when we briefly looked at Pum-Tech Korea's (KOSDAQ:251970) ROCE trend, we were pretty happy with what we saw.

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. Analysts use this formula to calculate it for Pum-Tech Korea:

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

0.13 = ₩40b ÷ (₩377b - ₩72b) (Based on the trailing twelve months to June 2024).

Thus, Pum-Tech Korea has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 6.2% generated by the Packaging industry.

See our latest analysis for Pum-Tech Korea

Above you can see how the current ROCE for Pum-Tech Korea compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Pum-Tech Korea .

What The Trend Of ROCE Can Tell Us

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 77% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that Pum-Tech Korea has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

In the end, Pum-Tech Korea has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 127% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

If you want to continue researching Pum-Tech Korea, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Pum-Tech Korea 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.