Is Seoul Viosys (KOSDAQ:092190) Likely To Turn Things Around?

Did you know there are some financial metrics that can provide clues of a potential 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 Seoul Viosys (KOSDAQ:092190) 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?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Seoul Viosys, this is the formula:

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

0.075 = ₩25b ÷ (₩608b - ₩277b) (Based on the trailing twelve months to September 2020).

So, Seoul Viosys has an ROCE of 7.5%. In absolute terms, that's a low return and it also under-performs the Semiconductor industry average of 9.8%.

View our latest analysis for Seoul Viosys

Above you can see how the current ROCE for Seoul Viosys compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From Seoul Viosys' ROCE Trend?

Things have been pretty stable at Seoul Viosys, with its capital employed and returns on that capital staying somewhat the same for the last . It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Seoul Viosys in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

On a separate but related note, it's important to know that Seoul Viosys has a current liabilities to total assets ratio of 45%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line

In a nutshell, Seoul Viosys has been trudging along with the same returns from the same amount of capital over the last . Yet to long term shareholders the stock has gifted them an incredible 152% return in the last year, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One final note, you should learn about the 4 warning signs we've spotted with Seoul Viosys (including 2 which are concerning) .

While Seoul Viosys 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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