We Think Mr. Blue (KOSDAQ:207760) Might Have The DNA Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. With that in mind, the ROCE of Mr. Blue (KOSDAQ:207760) looks great, so lets see what the trend can tell us.

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. Analysts use this formula to calculate it for Mr. Blue:

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

0.27 = ₩14b ÷ (₩70b - ₩16b) (Based on the trailing twelve months to December 2020).

Thus, Mr. Blue has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Media industry average of 6.8%.

See our latest analysis for Mr. Blue

In the above chart we have measured Mr. Blue'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 report for Mr. Blue.

The Trend Of ROCE

Mr. Blue is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 27%. Basically the business is earning more per dollar of capital invested and in addition to that, 150% more capital is being employed now too. So we're very much inspired by what we're seeing at Mr. Blue thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Mr. Blue is reaping the rewards from prior investments and is growing its capital base. And a remarkable 166% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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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