Returns At Micro Contact Solution (KOSDAQ:098120) Are On The Way Up

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Micro Contact Solution (KOSDAQ:098120) so let's look a bit deeper.

We've discovered 2 warning signs about Micro Contact Solution. View them for free.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Micro Contact Solution, this is the formula:

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

0.18 = ₩13b ÷ (₩82b - ₩9.5b) (Based on the trailing twelve months to March 2025).

So, Micro Contact Solution has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 5.9% it's much better.

See our latest analysis for Micro Contact Solution

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

What Does the ROCE Trend For Micro Contact Solution Tell Us?

The trends we've noticed at Micro Contact Solution are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 18%. Basically the business is earning more per dollar of capital invested and in addition to that, 117% more capital is being employed now too. 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

To sum it up, Micro Contact Solution has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 321% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Micro Contact Solution can keep these trends up, it could have a bright future ahead.

One more thing: We've identified 2 warning signs with Micro Contact Solution (at least 1 which makes us a bit uncomfortable) , and understanding these would certainly be useful.

While Micro Contact Solution 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.