What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, WIZ CORP (KOSDAQ:038620) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for WIZ CORP:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.028 = ₩2.8b ÷ (₩112b - ₩13b) (Based on the trailing twelve months to December 2024).
Thus, WIZ CORP has an ROCE of 2.8%. Ultimately, that's a low return and it under-performs the Software industry average of 5.9%.
View our latest analysis for WIZ CORP
Historical performance is a great place to start when researching a stock so above you can see the gauge for WIZ CORP's ROCE against it's prior returns. If you're interested in investigating WIZ CORP's past further, check out this free graph covering WIZ CORP's past earnings, revenue and cash flow.
So How Is WIZ CORP's ROCE Trending?
We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 2.8%. The amount of capital employed has increased too, by 144%. 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.
What We Can Learn From WIZ CORP's ROCE
All in all, it's terrific to see that WIZ CORP is reaping the rewards from prior investments and is growing its capital base. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.
Like most companies, WIZ CORP does come with some risks, and we've found 3 warning signs that you should be aware of.
While WIZ CORP isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Valuation is complex, but we're here to simplify it.
Discover if WIZ CORP might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.