If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at S&D's (KOSDAQ:260970) look very promising so lets take a look.
Return On Capital Employed (ROCE): What Is It?
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. To calculate this metric for S&D, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.29 = ₩17b ÷ (₩76b - ₩17b) (Based on the trailing twelve months to June 2024).
Therefore, S&D has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 7.3%.
Check out our latest analysis for S&D
Above you can see how the current ROCE for S&D compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for S&D .
So How Is S&D's ROCE Trending?
We like the trends that we're seeing from S&D. Over the last five years, returns on capital employed have risen substantially to 29%. Basically the business is earning more per dollar of capital invested and in addition to that, 102% more capital is being employed now too. So we're very much inspired by what we're seeing at S&D thanks to its ability to profitably reinvest capital.
The Bottom Line
All in all, it's terrific to see that S&D is reaping the rewards from prior investments and is growing its capital base. And a remarkable 187% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
One more thing: We've identified 2 warning signs with S&D (at least 1 which is significant) , and understanding these would certainly be useful.
High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.
About KOSDAQ:A260970
Flawless balance sheet with solid track record.
