Is NOROO PAINT & COATINGS (KRX:090350) Likely To Turn Things Around?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. However, after investigating NOROO PAINT & COATINGS (KRX:090350), we don't think it's current trends fit the mold of a multi-bagger.

What is 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. The formula for this calculation on NOROO PAINT & COATINGS is:

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

0.066 = ₩28b ÷ (₩661b - ₩238b) (Based on the trailing twelve months to September 2020).

Thus, NOROO PAINT & COATINGS has an ROCE of 6.6%. On its own, that's a low figure but it's around the 8.0% average generated by the Chemicals industry.

View our latest analysis for NOROO PAINT & COATINGS

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 NOROO PAINT & COATINGS' past further, check out this free graph of past earnings, revenue and cash flow.

So How Is NOROO PAINT & COATINGS' ROCE Trending?

There hasn't been much to report for NOROO PAINT & COATINGS' returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect NOROO PAINT & COATINGS to be a multi-bagger going forward.

Our Take On NOROO PAINT & COATINGS' ROCE

We can conclude that in regards to NOROO PAINT & COATINGS' returns on capital employed and the trends, there isn't much change to report on. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

NOROO PAINT & COATINGS does have some risks, we noticed 2 warning signs (and 1 which is a bit concerning) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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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