Investors Shouldn't Overlook The Favourable Returns On Capital At e-Credible (KOSDAQ:092130)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Ergo, when we looked at the ROCE trends at e-Credible (KOSDAQ:092130), we liked what we saw.

What is 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 e-Credible is:

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

0.29 = ₩17b ÷ (₩67b - ₩9.4b) (Based on the trailing twelve months to December 2020).

Therefore, e-Credible has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

View our latest analysis for e-Credible

Historical performance is a great place to start when researching a stock so above you can see the gauge for e-Credible's ROCE against it's prior returns. If you're interested in investigating e-Credible's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For e-Credible Tell Us?

In terms of e-Credible's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 29% and the business has deployed 78% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

In Conclusion...

In summary, we're delighted to see that e-Credible has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. And the stock has done incredibly well with a 145% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

While e-Credible looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether A092130 is currently trading for a fair price.

e-Credible is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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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