Return Trends At Studio Mir (KOSDAQ:408900) Aren't Appealing

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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 briefly looking over the numbers, we don't think Studio Mir (KOSDAQ:408900) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Studio Mir is:

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

0.05 = ₩1.9b ÷ (₩40b - ₩2.5b) (Based on the trailing twelve months to March 2024).

Thus, Studio Mir has an ROCE of 5.0%. In absolute terms, that's a low return but it's around the Entertainment industry average of 6.0%.

View our latest analysis for Studio Mir

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 Studio Mir has performed in the past in other metrics, you can view this free graph of Studio Mir's past earnings, revenue and cash flow.

How Are Returns Trending?

There hasn't been much to report for Studio Mir's returns and its level of capital employed because both metrics have been steady for the past one year. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Studio Mir to be a multi-bagger going forward.

Our Take On Studio Mir's ROCE

In a nutshell, Studio Mir has been trudging along with the same returns from the same amount of capital over the last one year. And in the last year, the stock has given away 23% so the market doesn't look too hopeful on these trends strengthening any time soon. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

Studio Mir does have some risks, we noticed 3 warning signs (and 2 which are potentially serious) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.