Returns On Capital Are Showing Encouraging Signs At Seoul Broadcasting System (KRX:034120)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Seoul Broadcasting System (KRX:034120) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

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 Seoul Broadcasting System is:

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

0.08 = ₩81b ÷ (₩1.3t - ₩336b) (Based on the trailing twelve months to September 2023).

Therefore, Seoul Broadcasting System has an ROCE of 8.0%. In absolute terms, that's a low return, but it's much better than the Media industry average of 3.9%.

See our latest analysis for Seoul Broadcasting System

In the above chart we have measured Seoul Broadcasting System'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 Seoul Broadcasting System .

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Over the last five years, returns on capital employed have risen substantially to 8.0%. The amount of capital employed has increased too, by 38%. So we're very much inspired by what we're seeing at Seoul Broadcasting System thanks to its ability to profitably reinvest capital.

What We Can Learn From Seoul Broadcasting System's ROCE

In summary, it's great to see that Seoul Broadcasting System can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Considering the stock has delivered 19% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to continue researching Seoul Broadcasting System, you might be interested to know about the 3 warning signs that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.