Does NEOWIZ HOLDINGS (KOSDAQ:042420) Have The Makings Of A Multi-Bagger?

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at NEOWIZ HOLDINGS (KOSDAQ:042420) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on NEOWIZ HOLDINGS is:

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

0.082 = ₩54b ÷ (₩709b - ₩57b) (Based on the trailing twelve months to September 2020).

Therefore, NEOWIZ HOLDINGS has an ROCE of 8.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.4%.

Check out our latest analysis for NEOWIZ HOLDINGS

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 want to delve into the historical earnings, revenue and cash flow of NEOWIZ HOLDINGS, check out these free graphs here.

How Are Returns Trending?

NEOWIZ HOLDINGS is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 125% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From NEOWIZ HOLDINGS' ROCE

In summary, we're delighted to see that NEOWIZ HOLDINGS has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Considering the stock has delivered 13% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

NEOWIZ HOLDINGS does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

While NEOWIZ HOLDINGS isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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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