Returns Are Gaining Momentum At SOOSAN INT (KOSDAQ:050960)

There are a few key trends to look for if we want to identify the next multi-bagger. 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 SOOSAN INT's (KOSDAQ:050960) returns on capital, so let's have a look.

Understanding 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 SOOSAN INT is:

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

0.075 = ₩6.5b ÷ (₩98b - ₩12b) (Based on the trailing twelve months to December 2023).

So, SOOSAN INT has an ROCE of 7.5%. In absolute terms, that's a low return, but it's much better than the Software industry average of 6.2%.

Check out our latest analysis for SOOSAN INT

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating SOOSAN INT's past further, check out this free graph covering SOOSAN INT's past earnings, revenue and cash flow.

The Trend Of ROCE

SOOSAN INT has not disappointed with their ROCE growth. The figures show that over the last four years, ROCE has grown 106% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On SOOSAN INT's ROCE

To bring it all together, SOOSAN INT has done well to increase the returns it's generating from its capital employed. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 42% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching SOOSAN INT, you might be interested to know about the 2 warning signs that our analysis has discovered.

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.

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.