Are Investors Concerned With What's Going On At iMBCLtd (KOSDAQ:052220)?

To avoid investing in a business that's in decline, there's a few financial metrics that can provide early indications of aging. A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. This indicates the company is producing less profit from its investments and its total assets are decreasing. So after we looked into iMBCLtd (KOSDAQ:052220), the trends above didn't look too great.

Understanding 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. To calculate this metric for iMBCLtd, this is the formula:

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

0.012 = ₩692m ÷ (₩68b - ₩11b) (Based on the trailing twelve months to September 2020).

So, iMBCLtd has an ROCE of 1.2%. Ultimately, that's a low return and it under-performs the Media industry average of 9.3%.

View our latest analysis for iMBCLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for iMBCLtd's ROCE against it's prior returns. If you'd like to look at how iMBCLtd has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

In terms of iMBCLtd's historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 3.3% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on iMBCLtd becoming one if things continue as they have.

In Conclusion...

All in all, the lower returns from the same amount of capital employed aren't exactly signs of a compounding machine. Despite the concerning underlying trends, the stock has actually gained 10% over the last five years, so it might be that the investors are expecting the trends to reverse. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere.

If you'd like to know more about iMBCLtd, we've spotted 4 warning signs, and 1 of them is a bit unpleasant.

While iMBCLtd 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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