Can ISC (KOSDAQ:095340) Continue To Grow Its Returns On Capital?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, ISC (KOSDAQ:095340) looks quite promising in regards to its trends of return on capital.

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 ISC:

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

0.10 = ₩22b ÷ (₩245b - ₩35b) (Based on the trailing twelve months to September 2020).

So, ISC has an ROCE of 10%. That's a pretty standard return and it's in line with the industry average of 9.8%.

View our latest analysis for ISC

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

What Can We Tell From ISC's ROCE Trend?

We like the trends that we're seeing from ISC. Over the last five years, returns on capital employed have risen substantially to 10%. The amount of capital employed has increased too, by 24%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On ISC's ROCE

In summary, it's great to see that ISC 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. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 1.9% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you'd like to know more about ISC, we've spotted 3 warning signs, and 1 of them can't be ignored.

While ISC 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. 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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