Is SNU Precision (KOSDAQ:080000) Likely To Turn Things Around?

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. However, after briefly looking over the numbers, we don't think SNU Precision (KOSDAQ:080000) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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

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. Analysts use this formula to calculate it for SNU Precision:

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

0.091 = ₩11b ÷ (₩166b - ₩43b) (Based on the trailing twelve months to September 2020).

Thus, SNU Precision has an ROCE of 9.1%. On its own, that's a low figure but it's around the 9.8% average generated by the Semiconductor industry.

View our latest analysis for SNU Precision

Historical performance is a great place to start when researching a stock so above you can see the gauge for SNU Precision's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of SNU Precision, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

There hasn't been much to report for SNU Precision's returns and its level of capital employed because both metrics have been steady for the past two years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at SNU Precision in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

On another note, while the change in ROCE trend might not scream for attention, it's interesting that the current liabilities have actually gone up over the last two years. This is intriguing because if current liabilities hadn't increased to 26% of total assets, this reported ROCE would probably be less than9.1% because total capital employed would be higher.The 9.1% ROCE could be even lower if current liabilities weren't 26% of total assets, because the the formula would show a larger base of total capital employed. With that in mind, just be wary if this ratio increases in the future, because if it gets particularly high, this brings with it some new elements of risk.

Our Take On SNU Precision's ROCE

We can conclude that in regards to SNU Precision's returns on capital employed and the trends, there isn't much change to report on. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a separate note, we've found 2 warning signs for SNU Precision you'll probably want to know about.

While SNU Precision 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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