Here's What To Make Of PSK's (KOSDAQ:319660) Decelerating Rates Of Return

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So, when we ran our eye over PSK's (KOSDAQ:319660) trend of ROCE, we liked what we saw.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for PSK:

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

0.19 = ₩89b ÷ (₩561b - ₩92b) (Based on the trailing twelve months to September 2024).

Therefore, PSK has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 6.4% it's much better.

Check out our latest analysis for PSK

Above you can see how the current ROCE for PSK compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for PSK .

So How Is PSK's ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has employed 107% more capital in the last four years, and the returns on that capital have remained stable at 19%. 19% is a pretty standard return, and it provides some comfort knowing that PSK has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From PSK's ROCE

The main thing to remember is that PSK has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 199% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

PSK could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for A319660 on our platform quite valuable.

While PSK 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. 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.