Wooree BioLtd (KOSDAQ:082850) Hasn't Managed To Accelerate Its Returns

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Wooree BioLtd (KOSDAQ:082850) and its ROCE trend, we weren't exactly thrilled.

What Is Return On Capital Employed (ROCE)?

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 Wooree BioLtd is:

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

0.098 = ₩30b ÷ (₩660b - ₩350b) (Based on the trailing twelve months to June 2024).

Thus, Wooree BioLtd has an ROCE of 9.8%. In absolute terms, that's a low return, but it's much better than the Semiconductor industry average of 5.3%.

Check out our latest analysis for Wooree BioLtd

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

How Are Returns Trending?

The returns on capital haven't changed much for Wooree BioLtd in recent years. Over the past five years, ROCE has remained relatively flat at around 9.8% and the business has deployed 75% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 53% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously. Although because current liabilities are still 53%, some of that risk is still prevalent.

The Key Takeaway

In conclusion, Wooree BioLtd has been investing more capital into the business, but returns on that capital haven't increased. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 383% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you'd like to know about the risks facing Wooree BioLtd, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.