Investors Will Want Justem's (KOSDAQ:417840) Growth In ROCE To Persist

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. With that in mind, we've noticed some promising trends at Justem (KOSDAQ:417840) so let's look a bit deeper.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Justem is:

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

0.10 = ₩5.4b ÷ (₩81b - ₩29b) (Based on the trailing twelve months to June 2025).

Thus, Justem has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 7.5% generated by the Semiconductor industry.

See our latest analysis for Justem

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

So How Is Justem's ROCE Trending?

You'd find it hard not to be impressed with the ROCE trend at Justem. The data shows that returns on capital have increased by 154% over the trailing two years. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Justem appears to been achieving more with less, since the business is using 30% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 35% of its operations, which isn't ideal. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

The Key Takeaway

In the end, Justem has proven it's capital allocation skills are good with those higher returns from less amount of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 28% return over the last year. In light of that, we think it's worth looking further into this stock because if Justem can keep these trends up, it could have a bright future ahead.

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

While Justem 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.