Investors Met With Slowing Returns on Capital At UNID (KRX:014830)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at UNID (KRX:014830), it didn't seem to tick all of these boxes.

We've discovered 1 warning sign about UNID. View them for free.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for UNID, this is the formula:

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

0.083 = ₩95b ÷ (₩1.4t - ₩218b) (Based on the trailing twelve months to December 2024).

Therefore, UNID has an ROCE of 8.3%. In absolute terms, that's a low return but it's around the Chemicals industry average of 7.5%.

See our latest analysis for UNID

In the above chart we have measured UNID's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for UNID .

What Does the ROCE Trend For UNID Tell Us?

The returns on capital haven't changed much for UNID in recent years. The company has consistently earned 8.3% for the last five years, and the capital employed within the business has risen 37% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Key Takeaway

Long story short, while UNID has been reinvesting its capital, the returns that it's generating haven't increased. Although the market must be expecting these trends to improve because the stock has gained 84% over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

Like most companies, UNID does come with some risks, and we've found 1 warning sign that you should be aware of.

While UNID 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. 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.