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

What trends should we look for it we want to identify stocks that can 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. Speaking of which, we noticed some great changes in GOLFZON NEWDIN HOLDINGS' (KOSDAQ:121440) returns on capital, so let's have a look.

Understanding 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 GOLFZON NEWDIN HOLDINGS is:

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

0.037 = ₩27b ÷ (₩795b - ₩72b) (Based on the trailing twelve months to September 2020).

Therefore, GOLFZON NEWDIN HOLDINGS has an ROCE of 3.7%. In absolute terms, that's a low return and it also 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.

The Trend Of ROCE

GOLFZON NEWDIN HOLDINGS has broken into the black (profitability) and we're sure it's a sight for sore eyes. While the business was unprofitable in the past, it's now turned things around and is earning 3.7% on its capital. 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.

The Bottom Line

To bring it all together, GOLFZON NEWDIN HOLDINGS has done well to increase the returns it's generating from its capital employed. Astute investors may have an opportunity here because the stock has declined 12% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

GOLFZON NEWDIN HOLDINGS does have some risks, we noticed 2 warning signs (and 1 which is concerning) we think you should know about.

While GOLFZON NEWDIN HOLDINGS isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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