We Think Global Standard Technology (KOSDAQ:083450) Might Have The DNA Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. And in light of that, the trends we're seeing at Global Standard Technology's (KOSDAQ:083450) look very promising so lets take a look.

What Is 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. Analysts use this formula to calculate it for Global Standard Technology:

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

0.21 = ₩55b ÷ (₩315b - ₩52b) (Based on the trailing twelve months to June 2024).

So, Global Standard Technology has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Semiconductor industry average of 5.4%.

See our latest analysis for Global Standard Technology

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Global Standard Technology's past further, check out this free graph covering Global Standard Technology's past earnings, revenue and cash flow.

How Are Returns Trending?

We like the trends that we're seeing from Global Standard Technology. Over the last five years, returns on capital employed have risen substantially to 21%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 180%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

In summary, it's great to see that Global Standard Technology can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 360% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing Global Standard Technology, we've discovered 3 warning signs that you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.