Coloray International Investment (KOSDAQ:900310) Is Reinvesting At Lower Rates Of Return

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Coloray International Investment (KOSDAQ:900310) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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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. The formula for this calculation on Coloray International Investment is:

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

0.0029 = ₩745m ÷ (₩314b - ₩53b) (Based on the trailing twelve months to June 2025).

So, Coloray International Investment has an ROCE of 0.3%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 7.0%.

See our latest analysis for Coloray International Investment

Historical performance is a great place to start when researching a stock so above you can see the gauge for Coloray International Investment's ROCE against it's prior returns. If you'd like to look at how Coloray International Investment has performed in the past in other metrics, you can view this free graph of Coloray International Investment's past earnings, revenue and cash flow.

The Trend Of ROCE

On the surface, the trend of ROCE at Coloray International Investment doesn't inspire confidence. Over the last five years, returns on capital have decreased to 0.3% from 15% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

What We Can Learn From Coloray International Investment's ROCE

In summary, Coloray International Investment is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 64% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Coloray International Investment does have some risks, we noticed 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

While Coloray International Investment 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.