WISE iTech (KOSDAQ:065370) Might Be Having Difficulty Using Its Capital Effectively

There are a few key trends to look for if we want to identify the next multi-bagger. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after briefly looking over the numbers, we don't think WISE iTech (KOSDAQ:065370) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on WISE iTech is:

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

0.012 = ₩613m ÷ (₩60b - ₩7.2b) (Based on the trailing twelve months to June 2025).

Thus, WISE iTech has an ROCE of 1.2%. Ultimately, that's a low return and it under-performs the Software industry average of 6.0%.

View our latest analysis for WISE iTech

Historical performance is a great place to start when researching a stock so above you can see the gauge for WISE iTech's ROCE against it's prior returns. If you'd like to look at how WISE iTech has performed in the past in other metrics, you can view this free graph of WISE iTech's past earnings, revenue and cash flow.

How Are Returns Trending?

When we looked at the ROCE trend at WISE iTech, we didn't gain much confidence. Around five years ago the returns on capital were 5.3%, but since then they've fallen to 1.2%. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.

On a side note, WISE iTech has done well to pay down its current liabilities to 12% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

The Key Takeaway

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. These growth trends haven't led to growth returns though, since the stock has fallen 51% over the last five years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

On a separate note, we've found 2 warning signs for WISE iTech you'll probably want to 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.