Here's What's Concerning About Koh Young Technology's (KOSDAQ:098460) Returns On Capital

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Koh Young Technology (KOSDAQ:098460) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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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. The formula for this calculation on Koh Young Technology is:

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

0.011 = ₩3.7b ÷ (₩370b - ₩35b) (Based on the trailing twelve months to June 2025).

Therefore, Koh Young Technology has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Semiconductor industry average of 7.6%.

Check out our latest analysis for Koh Young Technology

Above you can see how the current ROCE for Koh Young Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Koh Young Technology for free.

So How Is Koh Young Technology's ROCE Trending?

In terms of Koh Young Technology's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 1.1% from 8.6% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

Our Take On Koh Young Technology's ROCE

Bringing it all together, while we're somewhat encouraged by Koh Young Technology's reinvestment in its own business, we're aware that returns are shrinking. And with the stock having returned a mere 11% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

One more thing, we've spotted 2 warning signs facing Koh Young Technology that you might find interesting.

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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.