Rorze Systems (KOSDAQ:071280) Is Looking To Continue Growing Its Returns On Capital

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. So on that note, Rorze Systems (KOSDAQ:071280) looks quite promising in regards to its trends of return on capital.

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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 Rorze Systems is:

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

0.16 = ₩20b ÷ (₩157b - ₩35b) (Based on the trailing twelve months to December 2024).

Therefore, Rorze Systems has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 5.5% generated by the Semiconductor industry.

See our latest analysis for Rorze Systems

Historical performance is a great place to start when researching a stock so above you can see the gauge for Rorze Systems' ROCE against it's prior returns. If you're interested in investigating Rorze Systems' past further, check out this free graph covering Rorze Systems' past earnings, revenue and cash flow.

So How Is Rorze Systems' ROCE Trending?

The trends we've noticed at Rorze Systems are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 16%. The amount of capital employed has increased too, by 32%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Rorze Systems' ROCE

All in all, it's terrific to see that Rorze Systems is reaping the rewards from prior investments and is growing its capital base. And a remarkable 202% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a separate note, we've found 1 warning sign for Rorze Systems you'll probably want to know about.

While Rorze Systems 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.