LOT VACUUM (KOSDAQ:083310) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in LOT VACUUM's (KOSDAQ:083310) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for LOT VACUUM:

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

0.05 = ₩14b ÷ (₩338b - ₩60b) (Based on the trailing twelve months to September 2024).

Therefore, LOT VACUUM has an ROCE of 5.0%. Ultimately, that's a low return and it under-performs the Semiconductor industry average of 6.5%.

Check out our latest analysis for LOT VACUUM

Historical performance is a great place to start when researching a stock so above you can see the gauge for LOT VACUUM's ROCE against it's prior returns. If you'd like to look at how LOT VACUUM has performed in the past in other metrics, you can view this free graph of LOT VACUUM's past earnings, revenue and cash flow.

The Trend Of ROCE

LOT VACUUM has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 5.0% on its capital. In addition to that, LOT VACUUM is employing 71% 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.

The Key Takeaway

In summary, it's great to see that LOT VACUUM has managed to break into profitability and is continuing to reinvest in its business. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 0.6% to shareholders. So with that in mind, we think the stock deserves further research.

If you want to continue researching LOT VACUUM, you might be interested to know about the 3 warning signs that our analysis has discovered.

While LOT VACUUM may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.