If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at JNB (KOSDAQ:452160) and its ROCE trend, we weren't exactly thrilled.
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 JNB, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.12 = ₩4.9b ÷ (₩54b - ₩13b) (Based on the trailing twelve months to March 2023).
Therefore, JNB has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 7.2% it's much better.
Check out our latest analysis for JNB
Historical performance is a great place to start when researching a stock so above you can see the gauge for JNB's ROCE against it's prior returns. If you'd like to look at how JNB has performed in the past in other metrics, you can view this free graph of JNB's past earnings, revenue and cash flow.
How Are Returns Trending?
There hasn't been much to report for JNB's returns and its level of capital employed because both metrics have been steady for the past . Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at JNB in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.
Our Take On JNB's ROCE
In a nutshell, JNB has been trudging along with the same returns from the same amount of capital over the last . Although the market must be expecting these trends to improve because the stock has gained 53% over the last year. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.
If you want to know some of the risks facing JNB we've found 5 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
About KOSDAQ:A452160
Slight with imperfect balance sheet.
