The Returns On Capital At EXEM (KOSDAQ:205100) Don't Inspire Confidence

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating EXEM (KOSDAQ:205100), we don't think it's current trends fit the mold of a multi-bagger.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for EXEM, this is the formula:

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

0.07 = ₩9.1b ÷ (₩138b - ₩8.3b) (Based on the trailing twelve months to March 2025).

So, EXEM has an ROCE of 7.0%. On its own, that's a low figure but it's around the 5.9% average generated by the Software industry.

View our latest analysis for EXEM

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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of EXEM.

What Does the ROCE Trend For EXEM Tell Us?

In terms of EXEM's historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 11%, but since then they've fallen to 7.0%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line On EXEM's ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for EXEM. These trends are starting to be recognized by investors since the stock has delivered a 7.7% gain to shareholders who've held over the last five years. Therefore we'd recommend looking further into this stock to confirm if it has the makings of a good investment.

If you want to continue researching EXEM, you might be interested to know about the 1 warning sign that our analysis has discovered.

While EXEM 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.

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

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.