Is Wooree E&L (KOSDAQ:153490) A Future Multi-bagger?

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. So on that note, Wooree E&L (KOSDAQ:153490) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for Wooree E&L, this is the formula:

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

0.037 = ₩2.5b ÷ (₩108b - ₩42b) (Based on the trailing twelve months to September 2020).

Therefore, Wooree E&L has an ROCE of 3.7%. Ultimately, that's a low return and it under-performs the Semiconductor industry average of 9.8%.

Check out our latest analysis for Wooree E&L

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

The Trend Of ROCE

While the ROCE is still rather low for Wooree E&L, we're glad to see it heading in the right direction. The figures show that over the last five years, returns on capital have grown by 420%. The company is now earning ₩0.04 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 30% less capital than it was five years ago. Wooree E&L may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 39%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Bottom Line On Wooree E&L's ROCE

In summary, it's great to see that Wooree E&L has been able to turn things around and earn higher returns on lower amounts of capital. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you want to continue researching Wooree E&L, you might be interested to know about the 3 warning signs that our analysis has discovered.

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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