UBIVELOX (KOSDAQ:089850) Might Have The Makings Of A Multi-Bagger

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in UBIVELOX's (KOSDAQ:089850) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

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. Analysts use this formula to calculate it for UBIVELOX:

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

0.075 = ₩17b ÷ (₩318b - ₩97b) (Based on the trailing twelve months to December 2020).

So, UBIVELOX has an ROCE of 7.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.1%.

View our latest analysis for UBIVELOX

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

What Can We Tell From UBIVELOX's ROCE Trend?

UBIVELOX has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 7.5% on its capital. Not only that, but the company is utilizing 185% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Key Takeaway

Overall, UBIVELOX gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 6.3% to shareholders. So with that in mind, we think the stock deserves further research.

UBIVELOX does have some risks though, and we've spotted 2 warning signs for UBIVELOX that you might be interested in.

While UBIVELOX 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. 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.
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