We Like SK hynix's (KRX:000660) Returns And Here's How They're Trending

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Speaking of which, we noticed some great changes in SK hynix's (KRX:000660) returns on capital, so let's have a look.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on SK hynix is:

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

0.28 = ₩28t ÷ (₩124t - ₩25t) (Based on the trailing twelve months to March 2025).

Therefore, SK hynix has an ROCE of 28%. That's a fantastic return and not only that, it outpaces the average of 6.3% earned by companies in a similar industry.

Check out our latest analysis for SK hynix

Above you can see how the current ROCE for SK hynix compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering SK hynix for free.

So How Is SK hynix's ROCE Trending?

SK hynix is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 28%. Basically the business is earning more per dollar of capital invested and in addition to that, 70% more capital is being employed now too. So we're very much inspired by what we're seeing at SK hynix thanks to its ability to profitably reinvest capital.

The Bottom Line On SK hynix's ROCE

All in all, it's terrific to see that SK hynix is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for A000660 that compares the share price and estimated value.

SK hynix is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.