Duksung (KRX:004830) Is Doing The Right Things To Multiply Its Share Price

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Duksung (KRX:004830) and its trend of ROCE, we really liked what we saw.

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. Analysts use this formula to calculate it for Duksung:

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

0.074 = ₩7.7b ÷ (₩134b - ₩30b) (Based on the trailing twelve months to September 2024).

Thus, Duksung has an ROCE of 7.4%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.4%.

View our latest analysis for Duksung

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

What Does the ROCE Trend For Duksung Tell Us?

Duksung has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 7.4% which is a sight for sore eyes. In addition to that, Duksung is employing 49% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line

To the delight of most shareholders, Duksung has now broken into profitability. Since the stock has returned a staggering 167% 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.

One more thing to note, we've identified 1 warning sign with Duksung and understanding this should be part of your investment process.

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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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.