Stock Analysis

Investors Will Want Asia Paper Manufacturing.Co.Ltd's (KRX:002310) Growth In ROCE To Persist

KOSE:A002310
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If you're looking for a multi-bagger, there's a few things to keep an eye out 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. Speaking of which, we noticed some great changes in Asia Paper Manufacturing.Co.Ltd's (KRX:002310) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Asia Paper Manufacturing.Co.Ltd is:

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

0.088 = ₩66b ÷ (₩882b - ₩138b) (Based on the trailing twelve months to December 2020).

Therefore, Asia Paper Manufacturing.Co.Ltd has an ROCE of 8.8%. In absolute terms, that's a low return, but it's much better than the Forestry industry average of 5.5%.

View our latest analysis for Asia Paper Manufacturing.Co.Ltd

roce
KOSE:A002310 Return on Capital Employed April 29th 2021

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Asia Paper Manufacturing.Co.Ltd has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Asia Paper Manufacturing.Co.Ltd's ROCE Trending?

We're delighted to see that Asia Paper Manufacturing.Co.Ltd is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 8.8% on its capital. And unsurprisingly, like most companies trying to break into the black, Asia Paper Manufacturing.Co.Ltd is utilizing 42% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On Asia Paper Manufacturing.Co.Ltd's ROCE

Overall, Asia Paper Manufacturing.Co.Ltd gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing to note, we've identified 2 warning signs with Asia Paper Manufacturing.Co.Ltd and understanding these should be part of your investment process.

While Asia Paper Manufacturing.Co.Ltd 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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