We Like These Underlying Trends At UBIVELOX (KOSDAQ:089850)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. 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. The formula for this calculation on UBIVELOX is:

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

0.07 = ₩15b ÷ (₩308b - ₩99b) (Based on the trailing twelve months to September 2020).

Thus, UBIVELOX has an ROCE of 7.0%. In absolute terms, that's a low return but it's around the Software industry average of 7.7%.

Check out our latest analysis for UBIVELOX

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 UBIVELOX's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For UBIVELOX Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 7.0%. The amount of capital employed has increased too, by 159%. So we're very much inspired by what we're seeing at UBIVELOX thanks to its ability to profitably reinvest capital.

What We Can Learn From UBIVELOX's ROCE

To sum it up, UBIVELOX has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. 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.

If you'd like to know about the risks facing UBIVELOX, we've discovered 4 warning signs that you should be aware of.

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.

When trading UBIVELOX or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.