The Return Trends At Hanyang Digitech (KOSDAQ:078350) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. So when we looked at Hanyang Digitech (KOSDAQ:078350) and its trend of ROCE, we really liked what we saw.

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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. 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)

0.11 = ₩19b ÷ (₩276b - ₩112b) (Based on the trailing twelve months to June 2025).

Thus, Hanyang Digitech has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 7.5% it's much better.

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'd like to look at how Hanyang Digitech has performed in the past in other metrics, you can view this free graph of 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 11% which is a sight for sore eyes. In addition to that, Hanyang Digitech is employing 217% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a related note, the company's ratio of current liabilities to total assets has decreased to 40%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that Hanyang Digitech has grown its returns without a reliance on increasing their current liabilities, which we're very happy with. However, current liabilities are still at a pretty high level, so just be aware that this can bring with it some risks.

In Conclusion...

Overall, Hanyang Digitech gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Since the stock has returned a staggering 279% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

If you'd like to know more about Hanyang Digitech, we've spotted 2 warning signs, and 1 of them is potentially serious.

While Hanyang Digitech 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.