The Return Trends At Genesem (KOSDAQ:217190) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Genesem's (KOSDAQ:217190) returns on capital, so let's have a look.

Our free stock report includes 1 warning sign investors should be aware of before investing in Genesem. Read for free now.

What Is 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 Genesem is:

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

0.12 = ₩6.5b ÷ (₩86b - ₩30b) (Based on the trailing twelve months to December 2024).

Therefore, Genesem has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 5.6% it's much better.

Check out our latest analysis for Genesem

Historical performance is a great place to start when researching a stock so above you can see the gauge for Genesem's ROCE against it's prior returns. If you'd like to look at how Genesem has performed in the past in other metrics, you can view this free graph of Genesem's past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that Genesem is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making four years ago but is is now generating 12% on its capital. Not only that, but the company is utilizing 59% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

What We Can Learn From Genesem's ROCE

In summary, it's great to see that Genesem has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a staggering 123% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Genesem does have some risks though, and we've spotted 1 warning sign for Genesem that you might be interested in.

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. 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.