TOEBOX KOREA.Ltd (KOSDAQ:215480) Might Have The Makings Of A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. With that in mind, we've noticed some promising trends at TOEBOX KOREA.Ltd (KOSDAQ:215480) so let's look a bit deeper.

Our free stock report includes 2 warning signs investors should be aware of before investing in TOEBOX KOREA.Ltd. Read for free now.

What Is 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. The formula for this calculation on TOEBOX KOREA.Ltd is:

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

0.035 = ₩1.2b ÷ (₩43b - ₩9.2b) (Based on the trailing twelve months to December 2024).

Therefore, TOEBOX KOREA.Ltd has an ROCE of 3.5%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 10%.

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'd like to look at how TOEBOX KOREA.Ltd has performed in the past in other metrics, you can view this free graph of TOEBOX KOREA.Ltd's past earnings, revenue and cash flow.

How Are Returns Trending?

We're delighted to see that TOEBOX KOREA.Ltd is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making four years ago but is is now generating 3.5% on its capital. In addition to that, TOEBOX KOREA.Ltd is employing 49% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

What We Can Learn From 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 60% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

TOEBOX KOREA.Ltd does have some risks though, and we've spotted 2 warning signs for TOEBOX KOREA.Ltd that you might be interested in.

While TOEBOX KOREA.Ltd may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.