Secuve (KOSDAQ:131090) Is Experiencing Growth In Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Secuve (KOSDAQ:131090) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Secuve is:

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

0.11 = ₩4.6b ÷ (₩46b - ₩4.3b) (Based on the trailing twelve months to September 2023).

So, Secuve has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Software industry average of 6.1% it's much better.

See our latest analysis for Secuve

Historical performance is a great place to start when researching a stock so above you can see the gauge for Secuve's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Secuve.

The Trend Of ROCE

Investors would be pleased with what's happening at Secuve. The data shows that returns on capital have increased substantially over the last five years to 11%. The amount of capital employed has increased too, by 76%. So we're very much inspired by what we're seeing at Secuve thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Secuve is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 27% over the last five years, there might be an opportunity here. 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 Secuve, we've discovered 3 warning signs that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.

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