Lake Materials (KOSDAQ:281740) Is Looking To Continue Growing Its Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Lake Materials (KOSDAQ:281740) so let's look a bit deeper.

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Understanding 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 Lake Materials:

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

0.083 = ₩19b ÷ (₩360b - ₩129b) (Based on the trailing twelve months to June 2025).

Therefore, Lake Materials has an ROCE of 8.3%. In absolute terms, that's a low return but it's around the Chemicals industry average of 7.0%.

See our latest analysis for Lake Materials

Historical performance is a great place to start when researching a stock so above you can see the gauge for Lake Materials' ROCE against it's prior returns. If you're interested in investigating Lake Materials' past further, check out this free graph covering Lake Materials' past earnings, revenue and cash flow.

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 8.3%. The amount of capital employed has increased too, by 347%. So we're very much inspired by what we're seeing at Lake Materials thanks to its ability to profitably reinvest capital.

What We Can Learn From Lake Materials' ROCE

All in all, it's terrific to see that Lake Materials is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 585% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Lake Materials does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

While Lake Materials 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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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.