Returns On Capital At e-future.Co.Ltd (KOSDAQ:134060) Paint A Concerning Picture

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 e-future.Co.Ltd (KOSDAQ:134060), we don't think it's current trends fit the mold of a multi-bagger.

Understanding 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. Analysts use this formula to calculate it for e-future.Co.Ltd:

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

0.036 = ₩913m ÷ (₩26b - ₩991m) (Based on the trailing twelve months to September 2024).

Thus, e-future.Co.Ltd has an ROCE of 3.6%. Ultimately, that's a low return and it under-performs the Media industry average of 4.5%.

View our latest analysis for e-future.Co.Ltd

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 e-future.Co.Ltd has performed in the past in other metrics, you can view this free graph of e-future.Co.Ltd's past earnings, revenue and cash flow.

So How Is e-future.Co.Ltd's ROCE Trending?

On the surface, the trend of ROCE at e-future.Co.Ltd doesn't inspire confidence. To be more specific, ROCE has fallen from 5.5% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

What We Can Learn From e-future.Co.Ltd's ROCE

In summary, e-future.Co.Ltd is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And in the last five years, the stock has given away 27% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think e-future.Co.Ltd has the makings of a multi-bagger.

e-future.Co.Ltd does have some risks though, and we've spotted 2 warning signs for e-future.Co.Ltd that you might be interested in.

While e-future.Co.Ltd 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.