Slowing Rates Of Return At Exicon (KOSDAQ:092870) Leave Little Room For Excitement

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Exicon (KOSDAQ:092870), it didn't seem to tick all of these boxes.

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. Analysts use this formula to calculate it for Exicon:

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

0.081 = ₩8.3b ÷ (₩118b - ₩16b) (Based on the trailing twelve months to December 2020).

So, Exicon has an ROCE of 8.1%. In absolute terms, that's a low return but it's around the Semiconductor industry average of 8.8%.

View our latest analysis for Exicon

In the above chart we have measured Exicon's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Exicon.

What The Trend Of ROCE Can Tell Us

The returns on capital haven't changed much for Exicon in recent years. Over the past five years, ROCE has remained relatively flat at around 8.1% and the business has deployed 34% 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.

In Conclusion...

As we've seen above, Exicon's returns on capital haven't increased but it is reinvesting in the business. Since the stock has gained an impressive 100% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you'd like to know more about Exicon, we've spotted 2 warning signs, and 1 of them is potentially serious.

While Exicon 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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This article by Simply Wall St is general in nature. 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.
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