Be Wary Of WISE iTech (KOSDAQ:065370) And Its Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at WISE iTech (KOSDAQ:065370) and its ROCE trend, we weren't exactly thrilled.

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Understanding 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 WISE iTech:

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

0.00073 = ₩37m ÷ (₩61b - ₩10b) (Based on the trailing twelve months to March 2025).

Thus, WISE iTech has an ROCE of 0.07%. In absolute terms, that's a low return and it also under-performs the Software industry average of 5.9%.

Check out our latest analysis for WISE iTech

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 WISE iTech's past further, check out this free graph covering WISE iTech's past earnings, revenue and cash flow.

What Does the ROCE Trend For WISE iTech Tell Us?

On the surface, the trend of ROCE at WISE iTech doesn't inspire confidence. Around five years ago the returns on capital were 5.6%, but since then they've fallen to 0.07%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line

In summary, despite lower returns in the short term, we're encouraged to see that WISE iTech is reinvesting for growth and has higher sales as a result. In light of this, the stock has only gained 11% over the last five years. So this stock may still be an appealing investment opportunity, if other fundamentals prove to be sound.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for WISE iTech (of which 3 are significant!) that you should know about.

While WISE iTech 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.