Returns On Capital Are Showing Encouraging Signs At WIZIT (KOSDAQ:036090)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in WIZIT's (KOSDAQ:036090) returns on capital, so let's have a look.

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

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. To calculate this metric for WIZIT, this is the formula:

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

0.027 = ₩12b ÷ (₩562b - ₩111b) (Based on the trailing twelve months to December 2024).

Therefore, WIZIT has an ROCE of 2.7%. Ultimately, that's a low return and it under-performs the Semiconductor industry average of 5.5%.

View our latest analysis for WIZIT

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating WIZIT's past further, check out this free graph covering WIZIT's past earnings, revenue and cash flow.

What Can We Tell From WIZIT's ROCE Trend?

The fact that WIZIT is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 2.7% which is a sight for sore eyes. In addition to that, WIZIT is employing 463% more capital than previously which is expected of a company that's 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.

What We Can Learn From WIZIT's ROCE

In summary, it's great to see that WIZIT has managed to break into profitability and is continuing to reinvest in its business. Since the stock has only returned 9.7% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

One more thing, we've spotted 2 warning signs facing WIZIT that you might find interesting.

While WIZIT 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.