Returns Are Gaining Momentum At KISCO (KRX:104700)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. So on that note, KISCO (KRX:104700) looks quite promising in regards to its trends of return on capital.

What Is 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 KISCO, this is the formula:

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

0.081 = ₩71b ÷ (₩973b - ₩96b) (Based on the trailing twelve months to March 2024).

Thus, KISCO has an ROCE of 8.1%. In absolute terms, that's a low return, but it's much better than the Metals and Mining industry average of 6.6%.

Check out our latest analysis for KISCO

In the above chart we have measured KISCO's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for KISCO .

What Does the ROCE Trend For KISCO Tell Us?

KISCO'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 68% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line

In summary, we're delighted to see that KISCO has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 101% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if KISCO can keep these trends up, it could have a bright future ahead.

One final note, you should learn about the 3 warning signs we've spotted with KISCO (including 1 which can't be ignored) .

While KISCO 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.