Here's What To Make Of DAE YOUNG Packaging.Co's (KRX:014160) Decelerating Rates Of Return

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Although, when we looked at DAE YOUNG Packaging.Co (KRX:014160), it didn't seem to tick all of these boxes.

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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 DAE YOUNG Packaging.Co:

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

0.0048 = ₩923m ÷ (₩225b - ₩34b) (Based on the trailing twelve months to December 2024).

So, DAE YOUNG Packaging.Co has an ROCE of 0.5%. Ultimately, that's a low return and it under-performs the Packaging industry average of 5.3%.

Check out our latest analysis for DAE YOUNG Packaging.Co

Historical performance is a great place to start when researching a stock so above you can see the gauge for DAE YOUNG Packaging.Co's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of DAE YOUNG Packaging.Co .

So How Is DAE YOUNG Packaging.Co's ROCE Trending?

Over the past , DAE YOUNG Packaging.Co's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if DAE YOUNG Packaging.Co doesn't end up being a multi-bagger in a few years time.

In Conclusion...

In a nutshell, DAE YOUNG Packaging.Co has been trudging along with the same returns from the same amount of capital over the last . Since the stock has gained an impressive 67% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

One more thing: We've identified 3 warning signs with DAE YOUNG Packaging.Co (at least 1 which is a bit concerning) , and understanding these would certainly be useful.

While DAE YOUNG Packaging.Co 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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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.