The Returns At Viatron Technologies (KOSDAQ:141000) Provide Us With Signs Of What's To Come

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think Viatron Technologies (KOSDAQ:141000) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Viatron Technologies, this is the formula:

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).

Thus, Viatron Technologies has an ROCE of 9.8%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.5%.

Check out our latest analysis for Viatron Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for Viatron Technologies' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Viatron Technologies, check out these free graphs here.

What Can We Tell From Viatron Technologies' ROCE Trend?

In terms of Viatron Technologies' historical ROCE movements, the trend isn't fantastic. Around four years ago the returns on capital were 14%, but since then they've fallen to 9.8%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line On Viatron Technologies' ROCE

While returns have fallen for Viatron Technologies in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. However, despite the promising trends, the stock has fallen 47% over the last five years, so there might be an opportunity here for astute investors. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

Viatron Technologies does have some risks, we noticed 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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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