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- Semiconductors
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- KOSDAQ:A078350
Returns on Capital Paint A Bright Future For Hanyang Digitech (KOSDAQ:078350)
What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Hanyang Digitech (KOSDAQ:078350) we really liked what we saw.
Understanding 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. To calculate this metric for Hanyang Digitech, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.20 = ₩33b ÷ (₩247b - ₩86b) (Based on the trailing twelve months to September 2024).
So, Hanyang Digitech has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Semiconductor industry average of 6.5%.
View our latest analysis for Hanyang Digitech
Historical performance is a great place to start when researching a stock so above you can see the gauge for Hanyang Digitech's ROCE against it's prior returns. If you're interested in investigating Hanyang Digitech's past further, check out this free graph covering Hanyang Digitech's past earnings, revenue and cash flow.
The Trend Of ROCE
The fact that Hanyang Digitech 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 20% which is a sight for sore eyes. Not only that, but the company is utilizing 153% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
In Conclusion...
Long story short, we're delighted to see that Hanyang Digitech's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a solid 100% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.
Hanyang Digitech does have some risks though, and we've spotted 1 warning sign for Hanyang Digitech that you might be interested in.
Hanyang Digitech is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
Valuation is complex, but we're here to simplify it.
Discover if Hanyang Digitech might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About KOSDAQ:A078350
Hanyang Digitech
Engages in the development, manufacture, and sale of semiconductor memory modules and VoIP terminals in South Korea and internationally.
Flawless balance sheet with solid track record.
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