The Returns On Capital At Axgate (KOSDAQ:356680) Don't Inspire Confidence

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after briefly looking over the numbers, we don't think Axgate (KOSDAQ:356680) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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. The formula for this calculation on Axgate is:

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

0.057 = ₩2.6b ÷ (₩62b - ₩17b) (Based on the trailing twelve months to June 2025).

Thus, Axgate has an ROCE of 5.7%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.8%.

View our latest analysis for Axgate

Historical performance is a great place to start when researching a stock so above you can see the gauge for Axgate's ROCE against it's prior returns. If you'd like to look at how Axgate has performed in the past in other metrics, you can view this free graph of Axgate's past earnings, revenue and cash flow.

How Are Returns Trending?

When we looked at the ROCE trend at Axgate, we didn't gain much confidence. To be more specific, ROCE has fallen from 17% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line

In summary, Axgate is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Although the market must be expecting these trends to improve because the stock has gained 66% over the last year. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you'd like to know more about Axgate, we've spotted 2 warning signs, and 1 of them is a bit concerning.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.