Has Viatron Technologies (KOSDAQ:141000) Got What It Takes To Become A Multi-Bagger?

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at Viatron Technologies (KOSDAQ:141000) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on Viatron Technologies is:

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

0.098 = ₩14b ÷ (₩187b - ₩44b) (Based on the trailing twelve months to September 2020).

So, Viatron Technologies has an ROCE of 9.8%. Even though it's in line with the industry average of 9.8%, it's still a low return by itself.

View our latest analysis for Viatron Technologies

Above you can see how the current ROCE for Viatron Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Viatron Technologies.

What Can We Tell From Viatron Technologies' ROCE Trend?

When we looked at the ROCE trend at Viatron Technologies, we didn't gain much confidence. Around four years ago the returns on capital were 14%, but since then they've fallen to 9.8%. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

In Conclusion...

In summary, despite lower returns in the short term, we're encouraged to see that Viatron Technologies is reinvesting for growth and has higher sales as a result. And there could be an opportunity here if other metrics look good too, because the stock has declined 58% in the last five years. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

Viatron Technologies does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is concerning...

While Viatron Technologies isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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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