Will Taekyung BK (KRX:014580) Multiply In Value Going Forward?

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after briefly looking over the numbers, we don't think Taekyung BK (KRX:014580) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Return On Capital Employed (ROCE): What is it?

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 Taekyung BK is:

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

0.034 = ₩7.7b ÷ (₩293b - ₩63b) (Based on the trailing twelve months to September 2020).

Thus, Taekyung BK has an ROCE of 3.4%. On its own that's a low return on capital but it's in line with the industry's average returns of 3.4%.

See our latest analysis for Taekyung BK

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 Taekyung BK's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Things have been pretty stable at Taekyung BK, with its capital employed and returns on that capital staying somewhat the same for the last four years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Taekyung BK doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

In a nutshell, Taekyung BK has been trudging along with the same returns from the same amount of capital over the last four years. Yet to long term shareholders the stock has gifted them an incredible 131% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a separate note, we've found 2 warning signs for Taekyung BK you'll probably want to know about.

While Taekyung BK 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. 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.
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