What Can The Trends At INTEKPLUS (KOSDAQ:064290) Tell Us About Their Returns?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at INTEKPLUS (KOSDAQ:064290) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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. The formula for this calculation on INTEKPLUS is:

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

0.15 = ₩4.1b ÷ (₩46b - ₩19b) (Based on the trailing twelve months to June 2020).

So, INTEKPLUS has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 9.8% generated by the Semiconductor industry.

See our latest analysis for INTEKPLUS

In the above chart we have measured INTEKPLUS' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

INTEKPLUS has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses three years ago, but now it's earning 15% which is a sight for sore eyes. In addition to that, INTEKPLUS is employing 44% 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.

On a side note, INTEKPLUS' current liabilities are still rather high at 42% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line

In summary, it's great to see that INTEKPLUS has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a staggering 531% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 1 warning sign facing INTEKPLUS that you might find interesting.

While INTEKPLUS 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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