What Do The Returns At Secuve (KOSDAQ:131090) Mean Going Forward?

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Secuve (KOSDAQ:131090) and its trend of ROCE, we really liked what we saw.

Understanding 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. Analysts use this formula to calculate it for Secuve:

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

0.17 = ₩5.6b ÷ (₩35b - ₩3.0b) (Based on the trailing twelve months to September 2020).

Thus, Secuve has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 7.1% generated by the Software industry.

View 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'd like to look at how Secuve has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

The trends we've noticed at Secuve are quite reassuring. Over the last four years, returns on capital employed have risen substantially to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 55% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that Secuve is reaping the rewards from prior investments and is growing its capital base. And with a respectable 96% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 1 warning sign facing Secuve that you might find interesting.

While Secuve may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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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