Investors Will Want TOEBOX KOREA.Ltd's (KOSDAQ:215480) Growth In ROCE To Persist

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at TOEBOX KOREA.Ltd (KOSDAQ:215480) and its trend of ROCE, we really liked what we saw.

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. Analysts use this formula to calculate it for TOEBOX KOREA.Ltd:

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

0.04 = ₩1.5b ÷ (₩44b - ₩6.2b) (Based on the trailing twelve months to June 2024).

So, TOEBOX KOREA.Ltd has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 12%.

Check out our latest analysis for TOEBOX KOREA.Ltd

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

How Are Returns Trending?

TOEBOX KOREA.Ltd has recently broken into profitability so their prior investments seem to be paying off. About three years ago the company was generating losses but things have turned around because it's now earning 4.0% on its capital. Not only that, but the company is utilizing 25% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On TOEBOX KOREA.Ltd's ROCE

To the delight of most shareholders, TOEBOX KOREA.Ltd has now broken into profitability. And since the stock has fallen 65% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you want to know some of the risks facing TOEBOX KOREA.Ltd we've found 3 warning signs (1 is a bit concerning!) that you should be aware of before investing here.

While TOEBOX KOREA.Ltd 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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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.