Stock Analysis

Is There More Growth In Store For Asia Paper Manufacturing.Co.Ltd's (KRX:002310) Returns On Capital?

KOSE:A002310
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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. With that in mind, we've noticed some promising trends at Asia Paper Manufacturing.Co.Ltd (KRX:002310) so let's look a bit deeper.

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. To calculate this metric for Asia Paper Manufacturing.Co.Ltd, this is the formula:

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

0.075 = ₩55b ÷ (₩862b - ₩125b) (Based on the trailing twelve months to September 2020).

Therefore, Asia Paper Manufacturing.Co.Ltd has an ROCE of 7.5%. On its own that's a low return, but compared to the average of 5.2% generated by the Forestry industry, it's much better.

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

roce
KOSE:A002310 Return on Capital Employed January 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're interested in investigating Asia Paper Manufacturing.Co.Ltd's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 7.5%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 27%. So we're very much inspired by what we're seeing at Asia Paper Manufacturing.Co.Ltd thanks to its ability to profitably reinvest capital.

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

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Asia Paper Manufacturing.Co.Ltd has. And a remarkable 181% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 2 warning signs for Asia Paper Manufacturing.Co.Ltd you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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