Hansol IONESLtd (KOSDAQ:114810) Hasn't Managed To Accelerate Its Returns

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Hansol IONESLtd (KOSDAQ:114810), it didn't seem to tick all of these boxes.

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 Hansol IONESLtd is:

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

0.045 = ₩8.0b ÷ (₩221b - ₩44b) (Based on the trailing twelve months to December 2023).

Thus, Hansol IONESLtd has an ROCE of 4.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.4%.

View our latest analysis for Hansol IONESLtd

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

The Trend Of ROCE

The returns on capital haven't changed much for Hansol IONESLtd in recent years. Over the past five years, ROCE has remained relatively flat at around 4.5% and the business has deployed 75% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

On a side note, Hansol IONESLtd has done well to reduce current liabilities to 20% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

What We Can Learn From Hansol IONESLtd's ROCE

In conclusion, Hansol IONESLtd has been investing more capital into the business, but returns on that capital haven't increased. Yet to long term shareholders the stock has gifted them an incredible 202% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a separate note, we've found 1 warning sign for Hansol IONESLtd you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.