Worldex Industry & Trading (KOSDAQ:101160) Could Become A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Worldex Industry & Trading (KOSDAQ:101160) we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Worldex Industry & Trading:

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

0.29 = ₩36b ÷ (₩170b - ₩45b) (Based on the trailing twelve months to December 2020).

So, Worldex Industry & Trading has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Semiconductor industry average of 8.8%.

View our latest analysis for Worldex Industry & Trading

Above you can see how the current ROCE for Worldex Industry & Trading 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 Worldex Industry & Trading here for free.

The Trend Of ROCE

The trends we've noticed at Worldex Industry & Trading are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 29%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 112%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

One more thing to note, Worldex Industry & Trading has decreased current liabilities to 27% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that Worldex Industry & Trading has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Worldex Industry & Trading has. And a remarkable 921% 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 Worldex Industry & Trading can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for Worldex Industry & Trading that we think you should be aware of.

Worldex Industry & Trading is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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