INFOvine.co.Ltd (KOSDAQ:115310) Could Be Struggling To Allocate Capital

When it comes to investing, there are some useful financial metrics that can warn us when a business is potentially in trouble. Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. So after glancing at the trends within INFOvine.co.Ltd (KOSDAQ:115310), we weren't too hopeful.

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Understanding 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 INFOvine.co.Ltd is:

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

0.083 = ₩7.9b ÷ (₩104b - ₩8.8b) (Based on the trailing twelve months to March 2025).

So, INFOvine.co.Ltd has an ROCE of 8.3%. In absolute terms, that's a low return, but it's much better than the Software industry average of 5.7%.

See our latest analysis for INFOvine.co.Ltd

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

How Are Returns Trending?

We are a bit worried about the trend of returns on capital at INFOvine.co.Ltd. Unfortunately the returns on capital have diminished from the 11% that they were earning five years ago. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on INFOvine.co.Ltd becoming one if things continue as they have.

The Bottom Line

In the end, the trend of lower returns on the same amount of capital isn't typically an indication that we're looking at a growth stock. Yet despite these poor fundamentals, the stock has gained a huge 302% over the last five years, so investors appear very optimistic. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.

INFOvine.co.Ltd does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is concerning...

While INFOvine.co.Ltd 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.