Will the Promising Trends At GOLFZON NEWDIN HOLDINGS (KOSDAQ:121440) Continue?

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. With that in mind, we've noticed some promising trends at GOLFZON NEWDIN HOLDINGS (KOSDAQ:121440) so let's look a bit deeper.

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 GOLFZON NEWDIN HOLDINGS:

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

0.019 = ₩13b ÷ (₩786b - ₩71b) (Based on the trailing twelve months to June 2020).

Therefore, GOLFZON NEWDIN HOLDINGS has an ROCE of 1.9%. Ultimately, that's a low return and it under-performs the Retail Distributors industry average of 5.4%.

Check out our latest analysis for GOLFZON NEWDIN HOLDINGS

Historical performance is a great place to start when researching a stock so above you can see the gauge for GOLFZON NEWDIN HOLDINGS' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of GOLFZON NEWDIN HOLDINGS, check out these free graphs here.

So How Is GOLFZON NEWDIN HOLDINGS' ROCE Trending?

We're delighted to see that GOLFZON NEWDIN HOLDINGS is reaping rewards from its investments and has now broken into profitability. The company now earns 1.9% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient.

In Conclusion...

To sum it up, GOLFZON NEWDIN HOLDINGS is collecting higher returns from the same amount of capital, and that's impressive. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 1.7% to shareholders. So with that in mind, we think the stock deserves further research.

On a final note, we found 2 warning signs for GOLFZON NEWDIN HOLDINGS (1 is concerning) you should be aware of.

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