Will The ROCE Trend At UNID (KRX:014830) Continue?

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 UNID (KRX:014830) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on UNID is:

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

0.10 = ₩87b ÷ (₩1.1t - ₩235b) (Based on the trailing twelve months to September 2020).

So, UNID has an ROCE of 10.0%. On its own that's a low return, but compared to the average of 8.0% generated by the Chemicals industry, it's much better.

View our latest analysis for UNID

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'd like to look at how UNID has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From UNID's ROCE Trend?

UNID's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 43% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On UNID's ROCE

As discussed above, UNID appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 57% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing UNID, we've discovered 1 warning sign that you should be aware of.

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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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