Returns At Knowmerce (KOSDAQ:473980) Are On The Way Up

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Knowmerce's (KOSDAQ:473980) returns on capital, so let's have a look.

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What Is 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. The formula for this calculation on Knowmerce is:

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

0.14 = ₩14b ÷ (₩111b - ₩14b) (Based on the trailing twelve months to June 2025).

Therefore, Knowmerce has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Entertainment industry average of 5.2% it's much better.

Check out our latest analysis for Knowmerce

In the above chart we have measured Knowmerce'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 analyst report for Knowmerce .

What Can We Tell From Knowmerce's ROCE Trend?

The fact that Knowmerce is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses three years ago, but now it's earning 14% which is a sight for sore eyes. In addition to that, Knowmerce is employing 537% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 13%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

Our Take On Knowmerce's ROCE

Long story short, we're delighted to see that Knowmerce's reinvestment activities have paid off and the company is now profitable. And with a respectable 11% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Knowmerce can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Knowmerce and understanding this should be part of your investment process.

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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.