HANMI Semiconductor (KRX:042700) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at HANMI Semiconductor (KRX:042700) so let's look a bit deeper.

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 HANMI Semiconductor:

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

0.17 = ₩105b ÷ (₩721b - ₩114b) (Based on the trailing twelve months to June 2024).

Therefore, HANMI Semiconductor has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 5.4% it's much better.

Check out our latest analysis for HANMI Semiconductor

In the above chart we have measured HANMI Semiconductor's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for HANMI Semiconductor .

What Can We Tell From HANMI Semiconductor's ROCE Trend?

Investors would be pleased with what's happening at HANMI Semiconductor. The data shows that returns on capital have increased substantially over the last five years to 17%. The amount of capital employed has increased too, by 194%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On HANMI Semiconductor's ROCE

In summary, it's great to see that HANMI Semiconductor can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 3,275% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for HANMI Semiconductor (of which 1 shouldn't be ignored!) that you should know about.

While HANMI Semiconductor 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.